Canada to be Peer Reviewed for Dispute Resolution | KPMG | CA

Canada to be Peer Reviewed for Dispute Resolution Mechanisms

Canada to be Peer Reviewed for Dispute Resolution

OECD moves forward to make treaty-related dispute resolution mechanisms more effective.

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The OECD is moving forward with its goal of making treaty-related dispute resolution mechanisms more effective under the Mutual Agreement Procedure (MAP), the dispute resolution provision included in the OECD model tax convention. As part of this initiative, the OECD released key documents that will form the basis of the MAP peer review and monitoring process, which detail 21 elements used to deliver the minimum standard that participating countries are required to implement, together with 12 best practices. Peer reviews will be conducted in batches starting in December 2016. Canada is in the first batch, along with other countries including the UK and the United States.

The ultimate goal for the OECD is to eliminate double taxation and/or taxation that is not in accordance with treaty provisions, and to help resolve tax-treaty related disputes in a timely and efficient manner. The OECD is currently seeking taxpayer feedback on their MAP experience with the jurisdictions being assessed in the first batch (via questionnaire) by November 28, 2016. The jurisdictions being assessed first are Belgium, Canada, the Netherlands, Switzerland, the UK and the United States.

Background
Action 14 under the BEPS plan recommended a stronger treaty-dispute resolution process. The OECD Model Tax Convention provides a mechanism, independent from the ordinary legal remedies available under domestic law, through which the competent authorities of the Contracting States may eliminate double taxation and/or resolve differences or difficulties regarding the interpretation or application of the Convention on a mutually-agreed basis. This mechanism, known as the mutual agreement procedure (MAP), is important to the proper application and interpretation of tax treaties. In particular, it is intended to ensure that taxpayers entitled to the benefits of the treaty are not subject to double taxation or taxation in a manner that is not in accordance with the terms of the treaty. This is particularly relevant in resolving double taxation on transfer pricing reassessments in various countries.

The measures developed under Action 14 aim to strengthen the effectiveness and efficiency of the MAP process. They aim to minimize the risks of uncertainty and unintended double taxation by ensuring the consistent and proper implementation of tax treaties, including the effective and timely resolution of disputes regarding their interpretation or application through MAP.

New OECD MAP documents
The released documents include:

  • A 'terms of reference', which translate the minimum standard approved in the final Action 14 report into a basis for peer review;
  • An 'assessment methodology' for the peer review and monitoring process
  • The MAP statistics reporting framework which reflects the collaborative approach competent authorities will take to resolve MAP cases and will ensure greater transparency on statistical information relating to the inventory, types and outcome of MAP cases through common reporting of MAP cases going forward, and
  • Guidance on information and documentation to be submitted with a MAP request.

The new review process will be based on existing treaties with no requirement for jurisdictions to negotiate any new treaties. The methodology for the MAP process contains the possibility for developing countries to defer the peer review, recognizing their capacity constraints.

For more information, contact your KPMG adviser.

Information is current to November 08, 2016. 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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