Canada: CRA report on MAP program and statistics for 2019

Canada: CRA 2019 report on MAP program and statistics

The Canada Revenue Agency (CRA) released its report on the mutual agreement procedure (MAP) program for 2019.

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The MAP report—of interest to taxpayers with cross-border business or financial dealings because it offers valuable insights on the CRA's administration of the MAP program—provides a summary of the program for the 2019 calendar year and reveals that although the CRA closed about 50% fewer negotiable MAP cases in 2019 (compared to 2018), those MAP cases were concluded approximately five months quicker.

The CRA report's release is intended to coincide with the OECD's report of MAP statistics for the same period.

Background

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 treaties and 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.

Completed cases

The CRA report of MAP statistics for 2019 reveals that the CRA:

  • Had 147 negotiable MAP cases on 1 January 2019
  • Accepted 75 new cases during 2019
  • Concluded 60 cases in 2019 (down from 126 cases concluded 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 target for completion time is 24 months for both foreign and Canadian-initiated adjustments.

Relief obtained

Of the 60 negotiable MAP cases that the CRA closed:

  • In 41 cases (68%), taxpayers obtained full relief from double taxation
  • In four cases (almost 7%), taxpayers had their cases resolved domestically

Taxpayers withdrew from the MAP program in five cases, and received unilateral relief in three cases. In the remaining seven 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 MAP access was denied).

Inventories of transfer pricing cases

Transfer pricing cases (which the MAP report calls “attribution/allocation cases”) are categorized in the MAP report 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, the transfer pricing cases were closed in just over 19 months.

The CRA's non-negotiable MAP cases (when the foreign tax authority is not involved) decreased to 78 cases in 2019 (from 118 in 2018).

Recent developments

The report:

  • Highlights that tax treaty negotiations with Brazil, Germany, Switzerland, and the Republic of San Marino are ongoing
  • 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
  • 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

Read a March 2021 report prepared by the KPMG member firm in Canada

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