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OECD’s 2018 MAP Report

OECD’s 2018 MAP Report

Global transfer pricing cases on the rise.

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Global transfer pricing cases are up by almost 20% in 2018, according to the OECD's 2018 mutual agreement procedure (MAP) report. In addition, the OECD advises that transfer pricing cases continue to take more time to resolve, although 60% of reporting jurisdictions met the 24-month target across all their cases. The report covers Canada and 88 more jurisdictions, and provides information on each jurisdiction, as well as aggregated global information. For the first time, the report also compares jurisdictions' performance across certain key indicators (e.g., time taken to close MAP cases and the number of cases closed compared to caseload).

The report was released as part of the OECD's "Tax Certainty Day" on September 16, 2019. This event brought together tax representatives and stakeholders from more than 50 countries, who discussed ways to make further improvements in both dispute prevention and dispute resolution, including co-operative compliance programs, advance pricing agreements (APAs), the International Compliance Assurance Program (ICAP), joint audit and MAP.

Background

Each year, the OECD releases annual statistics on the MAP caseloads of all its member countries and of non-OECD economies that agree to provide such statistics. This annual update is part of the OECD's work to improve and enhance the transparency of the MAP case process, in line with Action 14 of the OECD's BEPS Action Plan. The MAP statistics report provides a tangible way to measure the implementation of a minimum standard for resolving treaty-related disputes that was agreed to by the OECD and G20 countries.

MAP inventory

In the report, the OECD advises that new transfer pricing cases are up by almost 20% and other cases by more than 10% compared to 2017. The OECD notes that although half of the reporting jurisdictions show a decrease in case inventory, the aggregated global inventory continues to rise. The OECD says that this is because the number of transfer pricing cases closed increased at a slower pace than the number of cases started.

Timelines

The OECD advises that transfer pricing cases continue to take more time in 2018. On average, transfer pricing cases take approximately 33 months to resolve (up from 30 months in 2017), while other cases take approximately 14 months (down from 17 months in 2017). Although the OECD notes that average times for case resolution vary by jurisdiction, ranging from two to 66 months, about 60% of reporting jurisdictions met the 24-month target across all their cases, similar to statistics for 2017.

Outcomes

The OECD notes that more than 80% of MAP cases concluded in 2018 resolved the issue for transfer pricing cases and more than 75% for other cases. According to the report, only 2% of the MAP cases were closed because the competent authorities could not find a mutual agreement.

For transfer pricing MAP cases:

  • 75% were resolved with an agreement that fully or partially resolved taxation not in accordance with a tax treaty
  • 5% were granted unilateral relief
  • 5% were resolved via domestic remedy

For other cases:

  • 50% of cases closed were resolved with an agreement that fully or partially resolved taxation not in accordance with a tax treaty
  • 25% were granted unilateral relief
  • 3% were resolved via domestic remedy.

Spotlight on Canada

The report states that Canada opened 75 new transfer pricing cases in 2018, and closed 67 of its cases started on or before January 1, 2016, with an average resolution time of just over 15 months. The report also states that Canada closed a further 35 of its 50 outstanding transfer pricing cases started before January 1, 2016 with an average resolution time of just over 42 months. As a result, Canada ended 2018 with an overall inventory of 114 transfer pricing cases (compared to 141 at the end of 2017). As in the 2017 report, Canada resolved the majority of its cases by fully eliminating double taxation (or fully resolving that the taxation was not in accordance with a tax treaty). Overall, the U.S. still has the largest number of transfer pricing cases with Canada, both opened and closed. Quebec finances its own parental insurance benefits.

For more information, contact your KPMG advisor.

Information is current to September 24, 2019. 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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