Harmful Tax Practices – 2017 Peer Review Reports on the Exchange of Information on Tax Rulings

Canada

Canada has met all aspects of the terms of reference (ToR) for the calendar year 2017 (year in review) and no recommendations are made.

Canada can legally issue four types of rulings within the scope of the transparency framework.

In practice, Canada has issued 12 past rulings; for the period 1 April 2016 - 31 December 2016, Canada issued two future rulings; and for the year in review, Canada issued two future rulings within the scope of the transparency framework.

Peer input was received from one jurisdiction in respect of the exchanges of information on rulings received from Canada. It was positive, noting that information was complete, in the correct format and received in a timely manner with the summary provided a good overview of the ruling.

Introduction

193.  This peer review covers Canada’s implementation of the BEPS Action 5 transparency framework for the year 2017. The report has four parts, each relating to a key part of the ToR. Each part is discussed in turn. A summary of recommendations is included at the end of this report.

A. The information gathering process

194.  Canada can legally issue the four following types of rulings within the scope of the transparency framework: (i) rulings related to preferential regimes;1 (ii) cross-border unilateral advance pricing arrangements (APAs) and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles; (iii) permanent establishment rulings; and (iv) related party conduit rulings. In Canada, the Competent Authority Services Division (CASD) for APAs, and the Income Tax Rulings Directorate (ITRD) for the other categories are two services part of the CRA that are authorised to issue opinions. With the exception of APAs, Canada’s rulings are published in redacted form by third-party publishers, who provide access to the documents to their subscribers and redacted rulings are available from the Canada Revenue Agency (“CRA”) upon request.

Past rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1, I.4.2.2)

195.  For Canada, past rulings are any tax rulings within scope that are issued either: (i) on or after 1 January 2014 but before 1 April 2016; or (ii) on or after 1 January 2010 but before 1 January 2014, provided they were still in effect as at 1 January 2014.

196.  In the prior year peer review report, it was determined that the CRA’s undertakings to identify past rulings and all potential exchange jurisdictions were sufficient to meet the minimum standard. The CRA’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

Future rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1)

197.  For Canada, future rulings are any tax rulings within scope that are issued on or after 1 April 2016.

198.  In the prior year peer review report, it was determined that the CRA’s implementation of a new system to identify future rulings and all potential exchange jurisdictions was sufficient to meet the minimum standard. The CRA’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

Review and supervision mechanism (ToR I.4.3)

199.  In the prior year peer review report, it was determined that the CRA’s review and supervision mechanism was sufficient to meet the minimum standard. The CRA’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

Conclusion on section A

200.  Canada has met all of the ToR for the information gathering process and no recommendations are made.

B. The exchange of information

Legal basis for spontaneous exchange of information (ToR II.5.1, II.5.2)

201.  Canada has the necessary domestic legal basis to exchange information spontaneously. Canada notes that there are no legal or practical impediments that prevent the spontaneous exchange of information on rulings as contemplated in the Action 5 minimum standard.

202.  Canada is a party to international agreements permitting spontaneous exchange of information, including (i) the Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol (OECD/Council of Europe, 2011) (“the Convention”) and (ii) double tax agreements in force with 93 jurisdictions.2

Completion and exchange of templates (ToR II.5.3, II.5.4, II.5.5, II.5.6, II.5.7)

203.  In the prior year peer review report, it was determined that the CRA’s completion and exchange of templates were sufficient to meet the minimum standard. The CRA’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

204.  With respect to the completion of the summary section of the template, Canada confirms that it uses the suggested FHTP internal guidance.

205.  For the year in review, the timeliness of exchanges is as follows:

 

Past rulings in the scope of the transparency framework	Number of exchanges transmitted by 31 December 2017	Delayed exchanges
		Number of exchanges not transmitted by 31 December 2017	Reasons for the delays	Any other comments
	0	0	N/A	See below
Future rulings in the scope of the transparency framework	Number of exchanges transmitted within three months of the information becoming available to the competent authority or immediately after legal impediments have been lifted	Delayed exchanges
		Number of exchanges transmitted later than three months of the information on rulings becoming available to the competent authority	Reasons for the delays	Any other comments
	2	0	N/A
Total	2	0

 

Follow up requests received for exchange of the ruling	Number	Average time to provide response	Number of requests not answered
	0	0	N/A

206.  For the year in review, no past rulings had to be exchanged with new members of the Inclusive Framework that joined in 2017 and as such no additional exchanges on past rulings were required.

Conclusion on section B

207.  Canada has the necessary legal basis for spontaneous exchange of information, a process for completing the templates in a timely way and has completed all exchanges on time. Canada has met all of the ToR for the exchange of information process and no recommendations are made.

C. Statistics (ToR IV)

208.  The statistics for the year in review are as follows:

 

Category of ruling	Number of exchanges	Jurisdictions exchanged with
Rulings related to preferential regimes	0	N/A
Cross-border unilateral advance pricing arrangement (APAs) and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles	Included in de minimis	N/A
Cross-border rulings providing for a unilateral downward adjustment to the taxpayer’s taxable profits that is not directly reflected in the taxpayer’s financial / commercial accounts	N/A	N/A
Permanent establishment rulings	0	N/A
Related party conduit rulings	0	N/A
De minimis rule	2	N/A
IP regimes: total exchanges on taxpayers benefitting from the third category of IP assets, new entrants benefitting from grandfathered IP regimes; and taxpayers making use of the option to treat the nexus ratio as a rebuttable presumption	N/A	N/A
Total	2

D. Matters related to intellectual property regimes (ToR I.4.1.3)

209.  Canada does not offer an intellectual property regime for which transparency requirements under the Action 5 Report (OECD, 2015) were imposed.

Summary of recommendations on implementation of the transparency framework

 

Aspect of implementation of the transparency framework that should be improved	Recommendation for improvement
	No recommendations are made.

References

OECD (2017), BEPS Action 5 on Harmful Tax Practices – Terms of Reference and Methodology for the Conduct of the Peer Reviews of the Action 5 Transparency Framework, OECD/G20 Base Erosion and Profit Shifting Project, OECD, Paris. www.oecd.org/tax/beps/beps-action-5-harmful-tax-practices-peer-review-transparencyframework.pdf.

OECD (2015), Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. https://doi.org/10.1787/9789264241190-en.

OECD/Council of Europe (2011), The Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264115606-en.

Notes

← 1.  Life insurance business and international shipping.

← 2.  Parties to the Convention are available here: www.oecd.org/tax/exchange-of-tax-information/convention-on-mutual-administrative-assistance-in-tax-matters.htm. Canada also has bilateral agreements in force with Algeria, Armenia, Bangladesh, Cote d’Ivoire, Dominican Republic, Ecuador, Egypt, Gabon, Guyana, Hong Kong (China), Jamaica, Jordan, Kenya, Kuwait, Kyrgyzstan, Mongolia, Morocco, Oman, Papua New Guinea, Peru, Philippines, Serbia, Sri Lanka, Chinese Taipei, Tanzania, Thailand, Trinidad & Tobago, Turkey, United Arab Emirates, United States, Uzbekistan, Venezuela, Viet Nam, Zambia and Zimbabwe. The TIEA with Aruba also permits spontaneous exchange of information.