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Country-by-Country Reporting—CRA Updates Guidance

Country-by-Country Reporting—CRA Updates Guidance

Canada and the OECD now have similar CbC guidance

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The CRA recently released updated guidance for country-by-country (CbC) reporting. As a result, the CRA's guidance is more closely aligned with the latest OECD CbC guidance released in September 2018. Highlights from this new CRA update include clarification of the definition of "related" party revenues, instructions for e-filing, and new guidance for Canadian Surrogate Parent Entities (SPE) filing "substantially similar reports" prepared by non-Canadian Ultimate Parent Entities (UPE).

These updates are relevant for Canadian-parented multinational corporations (MNC) meeting the filing criteria for CbC reporting as well as certain Canadian members of a MNC that may have a local filing requirement in Canada. Canadian companies required to file a CbC report in Canada for the year ended December 31, 2017 will be required to submit their CbC report to the CRA by December 31, 2018.

Updates to guidance

Clarification of "related party" revenues - follows OECD guidance

In a welcome clarification, the CRA asserts that the term "related party" revenues refers to the aggregate amount of revenues from transactions between constituent entities listed in Table 2 of Canadian Form RC4649 - Country-by-Country Report. "Related party" under CbC reporting does not conform to the definition of "related" under subsection 251(2) of the Act, which is broader and could include revenues from entities not included in the MNC's consolidated financial statements but that are not dealing at arm's length. The CRA's definition in the updated guidance is consistent with OECD guidance.

Other alignments to OECD guidance

The CRA reminds taxpayers to consider OECD guidance on the implementation of CbC reporting. The CRA also refers to OECD guidance and states that:

  • Payments received from other constituent entities that are treated as dividends in the payor's jurisdiction should be excluded from profit (loss) before income tax
  • In general, a refund of income tax should be reported as a reduction in Income Tax Paid (on Cash Basis) in the reporting fiscal year in which it is received.

Substantially similar reports

In certain cases, a Canadian constituent entity may be appointed as a SPE of a foreign UPE. Where the foreign UPE has already prepared a CbC report in a substantially similar format to the Canadian Form RC4649 - Country-by-Country Report, and that report is required to be filed in a jurisdiction other than Canada, the Canadian SPE may file that foreign CbC report in Canada. However, the Canadian entity may still need to supplement the report by completing the cover page of the RC4649. Depending on the currency the foreign report uses, it may not be able to e-filed (i.e., it will have to be paper-filed).

Other updates

The revised guidance also includes:

  • Additional details on e-filing, including how to obtain an e-file online number and password
  • A new country code "X5" to be used for entities that are not resident in any jurisdiction for tax purposes (i.e., stateless)
  • A revised addressee for paper filings - filings should now be addressed to the International Policy Section, International Tax Division (no change to the physical mailing address)
  • A broad statement that any failure to file a CbC report for 2018 and subsequent filing years, will be presumed to be gross negligence unless special circumstances exist to explain the failure to file.

For more information, contact your KPMG adviser.

Information is current to December 18, 2018. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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