The CRA's 2020 report on its Mutual Agreement Procedure (MAP) Program is now available. The MAP report is relevant to taxpayers with cross-border business or financial dealings, since it covers the CRA's administration of the MAP program, which is intended to resolve cases of double taxation. This new report highlights that the CRA closed more MAP cases in 2020 compared to 2019 in roughly the same amount of time (just under 18 months).
Even though the CRA is currently engaged in negotiable MAP cases involving taxpayers from 31 different jurisdictions, the report shows that the United States represents 46% of these cases.
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 Organization for Economic Co-operation and Development (OECD) also publishes MAP statistics on an annual basis and further breaks the MAP caseload down by each jurisdiction, including Canada.
The CRA had 165 negotiable MAP cases on January 1, 2020 and accepted 72 new MAP cases during the year. The CRA also closed 74 MAP cases (up from 60 in 2019). Canadian-initiated cases continue to dominate the MAP process, with 81% of completed cases being initiated in Canada in 2020.
The 2020 MAP report indicates that the CRA took an average of 17.8 months to complete a negotiable MAP case in 2020 (up slightly from 17.6 months in 2019). The CRA concluded Canadian-initiated cases in just over 25 months (up from 16 months in 2019) and foreign-initiated cases in just over 11 months (down from 23.5 months), on average. The CRA targets completion times of 24 months for both foreign and Canadian initiated adjustments.
The CRA notes that the taxpayer in 36 out of the 74 cases closed in 2020 (almost 49%) received full relief from double taxation. In 8 cases (11%), the taxpayer received unilateral relief, and in 3 cases (4%), the case was resolved domestically. The remaining 27 cases (36%) were either withdrawn by the taxpayer, had objections not justified, resulted in no agreement or were denied MAP access.
Inventories of files
At year-end, 77% of negotiable cases were transfer pricing cases (which the MAP report calls attribution/allocation cases). The CRA's inventory of transfer pricing cases increased slightly in 2020 to 126 (from 123). The CRA accepted 55 new cases and completed 52 cases. On average, these transfer pricing cases were closed in just under 23 months. The CRA's non-negotiable MAP cases (where the foreign tax authority is not involved) increased significantly to 318 cases in 2020 (from 77 in 2019), largely as a result of COVID-19 related delays in closing cases involving certain pension elections under the Canada-U.S. treaty.
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Information is current to March 21, 2022. 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