The CRA’s latest MAP report will interest taxpayers with cross-border business or financial dealings
The CRA's 2019 report on its Mutual Agreement Procedure (MAP) Program is now available. The MAP report will be of interest to taxpayers with cross-border business or financial dealings, since it offers valuable insights on the CRA's administration of the MAP program.
This new report provides a summary of the program for the 2019 calendar year and highlights that although the CRA closed about 50% less negotiable MAP cases in the year compared to 2018, those cases were concluded approximately five months faster.
This publication's release coincides with the OECD's MAP statistics report for the same period.
The CRA's MAP program is designed to help taxpayers resolve cases of double taxation, or taxation that does not agree with a tax treaty. The MAP procedure is included in Canada's bilateral tax conventions. Under these treaty provisions, residents of either country can ask for help in resolving an issue covered by the treaty. In Canada, authority for resolving tax disputes is delegated to senior CRA officials known as the Competent Authority.
The OECD also publishes MAP statistics on an annual basis and further breaks the MAP caseload down by each jurisdiction, including Canada.
The CRA had 147 negotiable MAP cases on January 1, 2019 and accepted 75 new cases during the year. Of those cases, the CRA concluded 60 in 2019 (down from 126 in 2018).
Canadian-initiated cases continue to dominate the MAP process. In 2019, 80% of completed cases were initiated in Canada.
The 2019 MAP report indicates that the CRA took an average of 17.6 months to complete a negotiable MAP case in 2019 (down from just under 23 months in 2018). The CRA concluded Canadian-initiated cases in just over 16 months and foreign-initiated cases in 23.5 months, on average. The CRA targets completion times of 24 months for both foreign and Canadian initiated adjustments.
Of those 60 negotiable MAP cases that the CRA closed, the report notes that in 41 cases (68%), taxpayers obtained full relief from double taxation, and in four cases (almost 7%), taxpayers had their cases resolved domestically. The taxpayer withdrew their case in five cases, and the taxpayer received unilateral relief in three cases. In the remaining 7 cases, the taxpayer either received partial relief or no relief for various reasons (e.g., the objection was not justified, no agreement was made or they were denied MAP access).
Inventories of files
Transfer pricing cases (which the MAP report calls attribution/allocation cases) are categorized as negotiable cases and require negotiation to resolve an issue (rather than just applying the terms of the tax treaty). At year-end, 77% of negotiable cases were transfer pricing cases.
The CRA's inventory of transfer pricing cases increased in 2019 to 124 (from 114). The CRA accepted 50 new cases and completed 40 cases. On average, these transfer pricing cases were closed in just over 19 months.
The CRA's non-negotiable MAP cases (where the foreign tax authority is not involved) decreased to 78 cases in 2019 (from 118 in 2018).
The report highlights that tax treaty negotiations with Brazil, Germany, Switzerland and the Republic of San Marino are ongoing. The report also advises that the CRA expects to release an updated version of Information Circular 71-17R5, "Guidance on Competent Authority Assistance Under Canada's Tax Conventions" in the coming months. The report notes that the CRA is also continuing to develop updates to Information Circular 94-4R, "International Transfer Pricing: Advance Pricing Arrangements" in parallel with the OECD and Forum on Tax Administration's ongoing work on tax certainty.
For more information, contact your KPMG advisor.
Information is current to March 15, 2021. 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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