Since 2008, the Canada Revenue Agency (CRA) has disputed the offshore marketing company structure and related transfer pricing methodology we used for certain intercompany uranium sale and purchase agreements, and issued notices of reassessment for our 2003 through 2007 tax returns. We believe the ultimate resolution of this matter will not be material to our financial position, results of operations and cash flows in the year(s) of resolution.
There have been no fact changes in this case since we first disclosed it in 2008. However, in 2013, we were required to report separately the cash payment to CRA of approximately $27 million for taxes, interest and instalment penalties. Until 2013, we had not been required to make any significant cash tax payments due to the availability of elective deductions and tax loss carryovers. However, we were required to make small cash payments for interest and instalment penalties, which totaled about $13 million. These amounts were not reported separately as they were not material in any given year. Transfer pricing is a complex area of tax law, and it is difficult to predict the outcome of a case like ours as there are only a handful of reported court decisions on transfer pricing in Canada. However, tax authorities generally test two things:
-- the governance (structure)-- the price
As the majority of our customers are located outside Canada, we established an offshore marketing subsidiary. For this subsidiary to be able to enter into sales agreements, it must be backed up by a supply of uranium, which is made possible by our intercompany purchase and sales agreements as well as uranium supply agreements with third parties. We have arm's-length transfer price arrangements in place, which expose both parties to the risks and the rewards accruing to it under this portfolio of purchase and sales contracts.
With respect to the contract prices, they are generally comparable to those established in sales contracts between arm's-length buyers and sellers at the time. Based on an analysis of our contract portfolio and other contracts entered into at the time, we have recorded a cumulative tax provision of $65 million, where an argument could be made that our transfer price may have fallen outside of an appropriate range of pricing in uranium contracts for the period from 2003 to March 31, 2013.
We are confident that we will be successful in our case; however, the Canadian Income Tax Act includes provisions that require certain companies to pay 50% of the cash tax plus related interest and instalment penalties at the time of reassessment. For the years 2003 through 2007, the CRA issued notices of reassessment for approximately $1.3 billion of additional income for Canadian tax purposes, which would result in a related tax expense of about $380 million. Once elective deductions and tax loss carryovers were applied to the amounts reassessed in 2012, as well as interest and instalment penalties, the resulting amount payable was approximately $54 million, 50% of which, or $27 million, we remitted in 2013. Adding the $13 million remitted in previous years brings the total cash paid to CRA to $40 million. No transfer pricing penalties have been assessed.
Using the methodology we believe the CRA will continue to apply, and including the $1.3 billion already reassessed, we expect to receive notices of reassessment for a total of approximately $4.9 billion in income as taxable in Canada for the years 2003 through 2012, which would result in a related tax expense of approximately $1.4 billion. Cash taxes payable would be between $800 million and $850 million. In addition, we estimate there would be interest and instalment penalties applied that would be material to Cameco. We would be responsible for remitting 50% of the cash taxes, or between $400 million and $425 million, plus related interest and instalment penalties assessed, which would be material to Cameco.