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2019 OECD MAP report — Global caseload still rising

2019 OECD MAP report — Global caseload still rising

Canada’s inventory of transfer pricing cases grew in 2019

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Global transfer pricing cases are up 20% compared to 2018, according to the OECD's 2019 mutual agreement procedure (MAP) report, with total cases nearly doubling since 2016.

The OECD's report, which covers MAP caseloads in 105 jurisdictions, notes that Canada's resolved transfer pricing cases in 2019 were slightly outpaced by new cases opened, resulting in a higher inventory of transfer pricing cases at the end of 2019. The OECD notes that it expects the overall global caseload to continue to rise despite the COVID-19 crisis.

Background

Each year, the OECD releases statistics on the MAP caseloads of all its member countries, as well as participating non-OECD economies. This annual update is intended 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 measures the implementation of the 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 almost 2700 new cases were initiated in 2019, meaning that new transfer pricing cases are up by almost 20% compared to 2018, with other cases also up 10%. The OECD also advises that, although authorities closed more cases in 2019 compared to 2018, inventory continues to rise in most jurisdictions because of the increase in new cases.

Timelines

The OECD says it still took a long time to resolve transfer pricing cases in 2019. On average, transfer pricing cases took approximately 31 months to resolve (down slightly from 33 months in 2018), while other cases took approximately 22 months (up from 14 months in 2018). While it is not possible to estimate the time needed to close pending cases, the OECD report finds more than 20% of the 2019 end inventory has been pending for more than four years. For some jurisdictions, cases that were already pending before the minimum standard was introduced make up more than 40% of their 2019 end inventory.

Outcomes

In the report, the OECD notes that around 85% of MAP cases concluded in 2019 resolved the issue for transfer pricing cases (up from 80% in 2018). Further, the OECD states that more than 70% of other cases were fully resolved (down from 75% in 2018). Only 2% of the MAP cases were closed without the competent authorities finding a mutual agreement.

For transfer pricing MAP cases:

  • 77% were resolved with an agreement that fully or partially resolved taxation not in accordance with a tax treaty
  • 9% were granted unilateral relief
  • 2% were resolved via domestic remedy

For other cases:

  • 46% of cases closed were resolved with an agreement that fully resolved taxation not in accordance with a tax treaty
  • 19% were granted unilateral relief
  • 6% were resolved via domestic remedy

Spotlight on Canada

The OECD report states that Canada opened 50 new transfer pricing cases in 2019 and closed 36 of its cases started as of January 1, 2016, with an average resolution time of just over 14 months. The report also finds that Canada closed four more of its 15 outstanding transfer pricing cases started before January 1, 2016 with an average resolution time of almost 65 months. As a result, Canada ended 2019 with an overall inventory of 124 transfer pricing cases (up from 114 at the end of 2018).

As in the OECD's 2018 report, Canada resolved most of its transfer pricing cases (80%) by fully eliminating double taxation (or fully resolving that the taxation was not in accordance with a tax treaty). Overall, the United States still has the largest number of transfer pricing cases with Canada, both opened and closed.

For more information, contact your KPMG advisor.

Information is current to November 24, 2020. 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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