Canada’s federal budget for 2016 as presented by the Finance Minister reflects the recommendations from the OECD’s base erosion and profit shifting (BEPS) project—including changes to the OECD’s Transfer Pricing Guidelines for Multination Enterprises and Tax Administrations, to incorporate new standards for transfer pricing documentation.
The BEPS recommendations reflected in Canada’s 2016 budget include measures to address treaty abuse (or “treaty shopping”), the automatic exchange of tax rulings, and a minimum standard for country-by-country reporting.
Canada’s budget proposes to implement country-by-country reporting, and will apply only to multinational entities (MNEs) with a total annual consolidated group revenue of €750 million or more. When an MNE has an ultimate parent entity that is a resident of Canada (or a Canadian resident subsidiary), it will be required to file a country-by-country report with the Canada Revenue Agency without one year of the end of the fiscal year to which the report relates. The first exchanges of country-by-country reports are expected to occur by June 2018.
Draft legislative proposals are expected to be released for comment in the coming months.
The budget provides that the clarifications to the OECD’s Transfer Pricing Guidelines generally support the CRA’s current interpretation and application of the arm’s length principle. However, two other revisions are not complete, and the budget provides that the CRA will not be adjusting its administrative practices at this time concerning:
Read a March 2016 report [PDF 200 KB] prepared by the KPMG member firm in Canada: 2016 Federal Budget Highlights
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor 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 on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.