A new OECD report recommends improvements for tax-ruling-related information exchanges.
The OECD's new analysis includes almost 50 recommendations for participating countries' who have agreed to adopt the BEPS Action 5 minimum standard, which provides for the spontaneous exchange of information about certain tax rulings between relevant tax administrations in a timely manner.
The minimum standard applies to advance pricing agreements (APA), permanent establishment rulings, related-party conduit rulings, and rulings on preferential regimes.
The report includes recommendations for how countries could respond to information requests more promptly, and looks at how individual countries could structure information exchanges related to preferential tax regimes and intellectual property. This is the OECD's first annual peer review of the spontaneous exchange of information on tax rulings; it looks at 44 countries for the 2016 year.
Although the OECD examined Canada in its review, it did not make any Canada-specific recommendations. According to the report, Canada met all of the OECD's terms of reference during its 2016 review.
The 2015 BEPS Action 5 Report contains a minimum standard focused on countering harmful tax practices. Generally, the OECD notes that using concessional taxation rules to attract investment to a particular country has, over time, led to the theory that the world was on a "race to the bottom" with corporate taxation. The OECD's report makes recommendations on how to effectively counter harmful tax practices and takes transparency into account. The report recommends compulsory spontaneous exchange on rulings related to preferential regimes and also suggests requirements for substantial activity before any preferential regime is granted.
In a recent progress report, the OECD found that for a huge majority of the preferential tax regimes studied that required action to conform to current OECD guidelines, the required changes had already been made or initiated.
Report's Canadian findings
The OECD reviewed 22 of Canada's automatic exchanges of information in 2016 and 16 of them were regarding cross-border unilateral APAs, or other cross-border unilateral tax rulings that covered transfer pricing. The six remaining information exchanges concerned permanent establishment rulings (for context, in this report the OECD reviewed over 6,500 exchanges of information that took place by December 31, 2016). Over the course of 2016, the report says that Canada exchanged information with China, France, Germany, Ireland, the Netherlands, Singapore, the U.S., the UK, Japan, Sweden and Switzerland and met all of the OECD's terms of reference.
For more information, contact your KPMG adviser.
Information is current to December 19, 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