Canada: CbC report form published

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A form entitled ‘RC 4649’ and instructions for completing the country-by-country (CbC) report has been published on 3rd February 2017 by the Canada Revenue Agency (CRA) for reporting the income allocation, tax allocation and business activities of a multinational enterprise (MNE) group based on a tax authority and for reporting fiscal years that begin after 2015. The Bill C-29 has been passed by the House of Commons on 15th December 2016 that provides the final legislation to implement country-by-country (CbC) reporting. New section 233.8 of the Income Tax Act needs certain multinational enterprise (MNE) groups to submit a CbC report. The report contains role and identification of reporting entity, CbC report section and extra information section. The CbC report section contains overview of income allocation, taxes and business activity by tax jurisdictions, and list of all essential entities of MNE group included in each aggregation per tax jurisdiction.

According to the instructions, a CbC report need to be filed by 12 months after the last day of the reporting fiscal year.  Where notification of systemic failure has been received by the constituent entity, this deadline can be extended to 30 days after receipt of the notification. A tax jurisdiction will be in a position of systemic failure if it has a qualifying competent authority agreement (QCAA) in effect with Canada, but has suspended automatic exchange or has persistently failed to automatically provide CbC reports to Canada with respect to MNE groups that have constituent entities in Canada. Taxpayers who fail to complete and file the CbC report by the due date will be subject to penalties.

MNEs with annual consolidated group revenue equal to or more than equal to EUR 750 million are need to provide country-by-country reports that contain their income, taxes paid, and key economic activities. This information will be distributed by participating countries within their treaty networks. If the consolidated financial statements are reported in a currency other than the euro, a conversion to euros will have to be made to determine whether the threshold is met.

The Canadian tax resident who is treated as ultimate parent entity in the reporting fiscal year of the MNE group is need to file the CbC report. A constituent entity is required to file if ultimate parent entity of the MNE group is not obligated to submit a CbC report in its tax residence jurisdiction, or jurisdiction of tax residence of the ultimate parent entity does not have a QCAA in effect to which Canada is a party on or before the due date for filing the report for the reporting fiscal year, there has been a systemic failure of the jurisdiction of tax residence of the ultimate parent entity and the Minister has notified the constituent entity of the systemic failure.

A constituent entity is not required to file a CbC report if a surrogate parent entity of the MNE group files the report in respect of the reporting fiscal year with the tax authority of its jurisdiction of residence on or before the due date, and the jurisdiction of residence of the surrogate parent entity meets all of the following requirements: (i) CbC reports filing requirements, (ii) has a QCAA in effect to which Canada is a party on or before the due date for filing the CbC report in respect of the reporting fiscal year, (iii) not in a position of systemic failure and (iv) has been notified by the surrogate parent entity that it is the surrogate parent entity.

A surrogate parent entity that is tax resident in Canada, chosen by an MNE group, is required to file a CbC report in support of the ultimate parent entity. The Bill C-29 has been passed by the House of Commons on 15th December 2016 that provides the final legislation to implement country-by-country (CbC) reporting. The CbC reporting measures apply to reporting fiscal years of MNE groups that begin on or after 1st January 2016.

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