Canada: CbCR rules implemented in Canada

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Canada: CbCR rules implemented in Canada

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Dan Jankovic

Consistent with the recommendations of Article 13 of the BEPS Project, Canada passed, on December 15 2016, legislation implementing country-by-country reporting (CbCR).

Canada is a signatory to the Multilateral Competent Authority Agreement on the Automatic Exchange of Country-by-Country Reports, facilitating implementation of the transfer pricing reporting standards developed under Action 13 of the OECD's BEPS Project.

The Canadian legislation provides that a CbC report will generally be required to be completed in the prescribed manner with the Canada Revenue Agency (CRA) by:

  • The ultimate parent entity of the multinational enterprise group (MNE group) if it is resident in Canada in the reporting fiscal year; and

  • A Canadian-resident constituent entity of an MNE group that is not the ultimate parent entity of the MNE group if one of the following conditions is satisfied:

a) the ultimate parent entity of the MNE group is not obligated to file a CbC report in its jurisdiction of tax residence;

b) the jurisdiction of tax residence of the ultimate parent entity of the MNE group does not have a qualifying competent authority agreement (relating to the automatic exchange of CbC reports) in effect to which Canada is a party; or

c) there has been a "systemic failure" of the jurisdiction of tax residence of the ultimate parent entity and the CRA has notified the constituent entity of the systemic failure.

A jurisdiction will generally be in a position of "systemic failure" if it has a qualifying competent authority agreement in effect with Canada but it has suspended automatic exchange or it has persistently failed to automatically provide CbC reports in its possession (in respect of MNE groups that have constituent entities in Canada) to Canada.

The MNE group is defined in the legislation and contains three elements. The first element sets out the conditions for two or more entities to form a group based on requirements to prepare consolidated financial statements. The second element sets out the requirement that the group is a multinational by virtue of it having business entities operating in more than one jurisdiction. Finally, the third element provides an exclusion from the definition for "excluded MNE groups", which are groups that had consolidated group revenue of less than €750 million ($797.3 million) during the immediately preceding fiscal year. An MNE group will be exempt from Canadian CbCR obligations for a reporting fiscal year in which it qualifies as an excluded MNE group.

The legislation generally provides that a CbC report in respect of a reporting fiscal year of an MNE group must be filed within 12 months after the last day of the reporting fiscal year, and it applies to reporting fiscal years of MNE groups that begin on or after January 1 2016. The prescribed form for CbC reports has not been published yet, but generally is expected to be based on the template form released by the OECD.

Dan Jankovic (dan.jankovic@blakes.com), Calgary

Blake Cassels & Graydon

Tel: +1 403 260 9725

Website: www.blakes.com

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