Canada: Procedures for exchange of tax rulings under BEPS rules

Canada: Procedures for exchange of tax rulings

The Canada Revenue Agency (CRA) issued a technical interpretation outlining the types of rulings that potentially may be shared with other countries under Canada's new commitment to exchange information on certain tax rulings.

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The technical interpretation (TI 2016-0632941I7) also discusses the process that will be followed when providing these rulings to other countries and the information that the CRA will require from taxpayers requesting a ruling that falls within the scope of the exchange initiative. The technical interpretation also confirms that pre-ruling consultations will be made a permanent part of the advance income tax ruling service. 

Summary

Consistent with the OECD's recommendation to improve transparency, the CRA stated that it may exchange a summary of a ruling with the countries of residence of the taxpayer's immediate parent company, ultimate parent company, and certain other parties, if the ruling falls into one of the following categories:  

  • Cross-border rulings related to preferential tax regimes (including international shipping and certain foreign life insurance operations of a Canadian company)
  • Cross-border rulings related to transfer pricing legislation
  • Cross-border rulings providing a unilateral downward adjustment to the taxpayer's taxable profits not directly reflected in the taxpayer's accounts
  • Rulings on permanent establishments (e.g., the existence or absence of a permanent establishment or the attribution of profits to a permanent establishment)
  • Rulings on related-party conduits (e.g., cross-border flows of funds or income through a related-party conduit) 

After receiving a summary of the ruling, a foreign country may ask to receive relevant portions of the ruling in more detail. These exchanges of information will be performed by the CRA's Competent Authority Services Division according to the relevant tax treaties and other international agreements. With this protocol in effect, a taxpayer making a new ruling request must include sufficient information to allow the CRA to identify the taxpayer's immediate parent company, ultimate parent company, and other parties relevant to the ruling. 

The CRA also confirms that its pilot project of providing pre-ruling consultations was successful and that pre-ruling consultations will be made a permanent part of its advance income tax rulings service.

 

Read an April 2016 report [PDF 50 KB] prepared by the KPMG member firm in Canada: CRA Outlines Procedures for Exchange of Tax Rulings for BEPS 

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