The OECE Forum on Tax Administration (FTA) has published a handbook explaining participation in the international compliance assurance program (ICAP).
This objective was started in 2018, and is now taking more substance. It is a three-stage process. The taxpayer provides relevant available transfer pricing documentation, and if all relevant jurisdictions and the taxpayer agree, a risk assessment is developed by the tax administrations. The final stage includes a risk graded letter.
The program does not provide absolute certainty, although it may provide learnings into potential gaps, while also providing tax administrations some limited certainty after their comprehensive review.
The handbook, link attached, provides additional details.
The OECD International Compliance Assurance Programme (ICAP) is a voluntary programme for a multilateral co-operative risk assessment and assurance process.
ICAP uses Country-by-Country (CbC) data as part of its risk assessment analysis and includes potential benefits for participating taxpayers re: certainty and avoiding double taxation, among other benefits.
ICAP is still fairly new in practice, although the process should be understood as a tool in pro-active compliance.
Recent international tax developments include:
- US has communicated its concern to France regarding its Digital Services Tax
- US TCJA Section 250 final regulations will include guidance on “end-user” conformity and FDII documentation
- The IRS may use the new Advance Pricing and Mutual Agreement Program (APMA) Functional Cost Diagnostic Model released last February in examinations in appropriate cases, according to an IRS official this week
- GAO urged the IRS to develop a “comprehensive plan for managing efforts to leverage FATCA data in agency compliance efforts
- The Organisation for Economic Co-operation and Development’s Forum on Tax Administration (FTA) announced a second pilot of the International Compliance Assurance Program (ICAP 2.0). A new handbook that will guide the second pilot was also endorsed and published by the FTA. ICAP is a voluntary risk assessment and assurance program designed to facilitate open and cooperative multilateral engagement between multinational enterprise (MNE) groups willing to engage actively and transparently and tax administrations in jurisdictions where the MNEs have business activities.
Additional guidance, tax exam techniques and risk assessment are still very much in process in an effort to reduce uncertainty and provide faster resolutions to tax audits. EY’s Global Tax Alert provides additional details for reference.
Click to access 2019G_001616-19Gbl_Report%20on%20recent%20US%20international%20tax%20developments%20-%205%20April%202019.pdf
Attached are the latest BEPS developments; of particular importance is the International ComplianceAssurance Programme (ICAP). This program is a voluntary program that focuses on the Country-by-Country (CbC) reports to openly discuss tax risks.
This is a welcome collaborative effort between the tax administrations and MNEs, vs. using the CbC reports to draw unfounded assumptions.
Tax audits should also use this approach at the beginning of an audit to foster understanding and risks.
Click to access 2018G_00553-181Gbl_The%20Latest%20on%20BEPS%20-%2029%20January%202018.pdf