On January 23, 2018 the OECD issued a press release in which it announced that at that same date a pilot of a new Forum on Tax Administration (FTA) programme for the multilateral risk assessment of large MNE groups was launched. This so-called International Compliance Assurance Programme (ICAP) is a pilot for a voluntary programme that will use CbC Reports and other information to facilitate open and co-operative multilateral engagements between MNE groups and tax administrations, with a view to providing early tax certainty and assurance.
According to the press release issued by the OECD the pilot for ICAP, includes the following eight FTA member tax administrations: Australia, Canada, Italy, Japan, the Netherlands, Spain, the United Kingdom and the United States. In the press release it is stated that a multilateral assessment of specific international tax risks posed by each MNE group in the pilot will commence during the first half of 2018 and is expected to be completed within a target timeframe of 12 months.
The ICAP is a voluntary process available to large MNE groups headquartered in participating jurisdictions. The application process may vary by jurisdiction, but an MNE group which wishes to participate will be asked to identify participating jurisdictions where it has activity and that it wishes to be included in a multilateral risk assessment. Tax administrations in these jurisdictions will then confirm whether they agree to participate in ICAP for that MNE group, taking into account factors such as the group's presence in their jurisdiction and its risk profile. The multilateral risk assessment conducted under ICAP will not cover all of an MNE group's tax issues but will focus on those associated with transfer pricing, permanent establishments and any other material international issues agreed between the group and participating tax administrations.
Once an MNE group's participation in ICAP is confirmed, the group will be asked to provide a package of documents, including its CbC Report, to the lead tax administration. This will be shared among tax administrations participating in the MNE group's ICAP risk assessment, together with any other information these tax administrations hold on the group for risk assessment or risk assurance purposes, based on existing legal exchange instruments. A meeting will be held with the group and all participating tax administrations to discuss the content of the CbC Report and other documentation, to ensure a full and consistent understanding of the group's profile and activities.
Following this meeting, an initial risk assessment will be conducted by each participating tax administration, to determine whether they can gain comfort the MNE group poses no or low risk in the areas covered by ICAP. If this is not the case, a more detailed and comprehensive risk assessment will be conducted. At all stages, participating tax administrations will work collaboratively and the MNE group will be kept informed via the lead tax administration. Following the conclusion of the risk assessment stage, a meeting will be held with the MNE group to discuss the outcomes of the assessment. To the extent a participating tax administration agrees an issue covered by ICAP represents no or low tax risk, an assurance letter will be issued setting out these findings, the content of which will vary by jurisdiction. (It should be noted however that according to the ICAP Handbook ICAP does not provide an MNE group with legal certainty as may be achieved, for example, through an advance pricing agreement, but gives assurance where tax administrations participating in the programme consider a risk to be low.) According to the press release issued by the OECD the timeline for ICAP will depend upon a number of factors, but in most cases the period from the initial meeting to the issuance of assurance letters should be within 12 months.
Also on January 23, 2018 an ICAP Pilot handbook was released. In the handbook a.o. the following subjects are discussed:
o Introduction to the ICAP pilot
o What are the drivers for ICAP?
o What are the anticipated benefits from ICAP?
· Scope of the pilot
o Covered tax administrations
o Covered risks
o Covered periods
· The ICAP risk assessment process
o Provision of documentation package and kick-off meeting
o Level 1 risk assessment
o Level 2 risk assessment
o Outcome letters
· Governance, management and resources
o Management and resources
Click here to be forwarded to the International Compliance Assurance Programme Pilot Handbook as released by the OECD on January 23, 2018.
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