Franco-Nevada reaches settlement with CRA over units

Executive Summary

• Franco‑Nevada Corp. reached a settlement with the Canada Revenue Agency resolving transfer‑pricing disputes for the 2013‑2019 tax years of its Barbados and Mexico subsidiaries.
• No Canadian tax will be payable on the foreign earnings; penalties are reversed and interest reduced, eliminating additional cash taxes.
• The service‑fee markup will increase to 30 %, generating an additional $1.4 million (CAD) of taxable income, but after applying non‑capital losses no extra cash tax is expected.

Key Details

• Settlement covers reassessments under transfer‑pricing rules for fiscal years 2013‑2019 relating to Franco‑Nevada (Barbados) Corp. and Franco‑Nevada Mexico Corp. SA de CV.
• No Canadian tax liability on the foreign earnings of the two subsidiaries for the disputed years.
• Service‑fee markup adjusted from the current 7‑20 % range to 30 %, increasing internal charges for services provided to the subsidiaries.
• Resulting additional taxable income of $1.4 million (CAD) will be reported in Canada for 2013‑2019; non‑capital losses offset this, so no extra cash tax is anticipated.
• Transfer‑pricing penalties previously reflected in CRA reassessments are reversed.
• Interest charges from the reassessments are reduced and adjusted in line with the service‑fee change.
• Settlement is not legally binding for years after 2019, but Franco‑Nevada expects the established transfer‑pricing principles to apply prospectively absent material changes in facts or law.
• Legal counsel: Osler, Hoskin & Harcourt LLP.

Notable Quotes

“We are pleased to reach this settlement with the CRA and believe it is a great outcome for Franco‑Nevada and its shareholders,” said Paul Brink, President and CEO. “This settlement provides greater investment certainty for our global growth ambitions and puts the tax dispute behind us.”