Finance announced that Canada and the U.S. have signed a new exchange arrangement.
The new arrangement will implement the country-by-country reporting standard between the two countries. This standard was developed by the OECD in connection with its Base Erosion and Profit Shifting Action Plan, which was adopted by the OECD and G20 countries.
Canada and the U.S. will begin exchanging country-by-country reports for multinational enterprise groups whose fiscal years begin on or after January 1, 2016. The reports must be exchanged within fifteen months of the fiscal year-end of the group. However, reports for the 2016 year need only be exchanged within 18 months (because of transitional measures).
Under the country-by-country exchange agreement, information from country-by-country reports can only be used to assess high-level transfer pricing risks and risks related to base erosion and profit shifting. Where appropriate, it can also be used for economic and statistical analysis. Data from country-by-country reports may be used to make further enquiries into the affairs of multinational enterprise groups in the course of a tax audit and, then, to make adjustments to taxable income.
The information cannot be used as a substitute for a detailed transfer pricing analysis of individual transactions and prices based on a full functional and comparability analysis.
Canada has secured an extensive network of partners to exchange country-by-country reports with under the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports. This agreement was signed by over 50 other jurisdictions.
Under Canada's country-by-country reporting regime, reports must be filed within 12 months after the last day of the multinational enterprise group's reporting fiscal year that began on or after January 1, 2016. In the U.S., country-by-country reporting requirements apply to taxation years beginning on or after June 30, 2016. However, early reporting for periods beginning on or after January 1, 2016 is allowed.
For more information, contact your KPMG adviser.
Information is current to June 20, 2017. 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