On July 29, 2016 the Canadian Department of Finance released draft tax legislative proposals for consultation. These proposals would implement certain measures from the 2016 budget. The measures for which the Canadian Department of Finance released legislative proposals include a.o.: Alternative Arguments in Support of Assessments, Taxation of Switch Fund Shares, Sales of Linked Notes, Expanding Tax Support for Clean Energy, Emissions Trading Regimes, Multiplication of the Small Business Deduction, Avoidance of the Business Limit and Taxable Capital Limit, Life Insurance Policies, Debt-Parking to Avoid Foreign Exchange Gains, Valuation for Derivatives, Eligible Capital Property, Country-by-Country Reporting, the Common Reporting Standard Penalty and Consequential Amendments, Cross-Border Surplus Stripping and an Extension of the Back-to-Back Rules.
Although the raft tax legislative proposals that were released for consultation contain legislative proposals on several topics, below we will focus on the legislative proposal regarding Country-by-Country Reporting.
The Canadian Department of Finance invites interested parties to provide comments on the draft legislative proposals by September 27, 2016. Comments should be sent by e-mail to: This email address is being protected from spambots. You need JavaScript enabled to view it. or via normal mail to the following address:
Tax Policy Branch
Department of Finance
90 Elgin Street
Ottawa, Ontario
K1A 0G5
In this respect the Canadian Department of Finance published the following 2 documents:
· Legislative Proposals Relating to Income Tax, Sales Tax and Excise Duties
· Explanatory Notes Relating to the Income Tax Act, Excise Tax Act, Excise Act, 2001 and Related Legislation
Country-by-Country Reporting
The proposal sets out the reporting requirements for the country-by-country report that was developed by the Organisation for Economic Co-operation and Development (OECD) to enhance transparency for tax administrations by providing adequate information to assess high-level transfer pricing and other base erosion and profit-shifting related risks. These apply to reporting fiscal years of MNE groups that begin on or after January 1, 2016.
The proposal provides several definitions. The definition “multinational enterprise group” or “MNE group” contains three elements:
· The first element in paragraph sets out the conditions for two or more entities to form a group based on requirements to prepare consolidated financial statements.
· The second element described in paragraph sets out the requirement that the group is multinational by virtue of it having business entities operating in more than one jurisdiction.
· The third element provides an exclusion from the definition for “excluded MNE groups”, which are groups that had consolidated group revenue of less than €750 million during the immediately preceding fiscal year.
The proposal provides that a country-by-country report in respect of a reporting fiscal year of an MNE group must in principle be filed by 12 months after the last day of the reporting fiscal year.
According the proposal the Country-by-Country Report has to be filed by:
(a) the ultimate parent entity of the MNE group, if it is resident in Canada in the reporting fiscal year; or
(b) a constituent entity of the MNE group – which is not the ultimate parent entity of the MNE group – with respect to the reporting fiscal year of the MNE group, if the following conditions are satisfied:
(i) the constituent entity is resident in Canada in the reporting fiscal year, and
(ii) one of the following conditions applies:
(A) the ultimate parent entity of the MNE group is not obligated to file a country-by-country report in its jurisdiction of residence,
(B) the jurisdiction of residence of the ultimate parent entity of the MNE group does not have a qualifying competent authority agreement in effect to which Canada is a party on or before the time specified in subsection (6) for filing the country-by-country report for the reporting fiscal year, or
(C) there has been a systemic failure of the jurisdiction of residence of the ultimate parent entity and the Minister has notified the constituent entity of the systemic failure.
Under conditions the proposal however also allows that notwithstanding subsection (3), a constituent entity of an MNE group described in paragraph (3)(b) is not required to file a country-by-country report with the Minister with respect to a reporting fiscal year if:
(a) a surrogate parent entity of the MNE group files a country-by-country report in respect of the reporting fiscal year with the tax authority of its jurisdiction of residence on or before the date specified in subsection (6); and
(b) the jurisdiction of residence of the surrogate parent entity
(i) requires filing of country-by-country reports,
(ii) has a qualifying competent authority agreement in effect to which Canada is a party on or before the time specified in subsection (6) for filing the country-by-country report in respect of the reporting fiscal year,
(iii) is not in a position of systemic failure, and
(iv) has been notified by the surrogate parent entity that it is the surrogate parent entity.
For further information click here to be forwarded to the Legislative Proposals Relating to Income Tax, Sales Tax and Excise Duties or click here to be forwarded to the Explanatory Notes Relating to the Income Tax Act, Excise Tax Act, Excise Act, 2001 and Related Legislation as released on July 29, 2016 by the Canadian Department of Finance.
Copyright – internationaltaxplaza.info
and
Stay informed: Subscribe to International Tax Plaza’s Newsletter! It’s completely FREE OF CHARGE!
