Canada's CbC reporting is meeting international expectations.
The OECD has released its first peer review of its Country-by-Country (CbC) reporting initiative. Along with 94 other countries, the report examines Canada's domestic legal and administrative framework around CbC reporting and also looks at its exchange-of-information framework, and whether the country is using CbC reports appropriately and considering confidentiality. (CbC reports must be filed annually by large multinational enterprises for each jurisdiction in which they do business to report certain financial and business activity information.) The report only makes one substantive recommendation to Canada, asking it to either amend its local filing condition or take steps to ensure that its CbC-reporting local filing obligation only applies in specific circumstances.
The OECD says that it will ultimately use its annual peer reviews to analyze how tax administrations are using CbC reports to assess various risks, including transfer pricing risks. The OECD says this work will help jurisdictions use CbC reports more effectively, enabling them to identify areas where the tax risks posed by MNE Groups are low and to instead focus resources on those issues where risk is greatest.
The OECD says that Canadian legislation regarding local filing is broader than it should be. Under Canada's legislation, local filing may be required in circumstances where there is no current international agreement between Canada and an Ultimate Parent Entity's residence of jurisdiction, which is not permitted under the OECD's terms of reference. Canada has explained there will be relatively few cases where it does not have a current international agreement with the residence jurisdiction of the Ultimate Parent Entity of an MNE group (since it is party to the Convention on Mutual Administrative Assistance in Tax Matters and has 93 bilateral tax conventions which provide for Automatic Exchange of Information). However, the OECD still recommends an amendment.
First annual peer review
This peer review looks at 95 different jurisdictions that have agreed to CbC reporting and examines their domestic legal and administrative frameworks, among other things, as of January 2018. Another peer review was recently launched and will focus on exchange of information, confidentiality, and appropriate-use conditions.
The report says that countries that have passed CbC legislation are largely consistent with the BEPS Action 13 minimum standard. Some jurisdictions have received recommendations for improvement on certain specific aspects of their legislation and work has already begun to bring the provisions concerned in line with the standard.
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