The OECD has updated the required documentation for the International Compliance Assurance Programme (ICAP). The Main Documentation Package has been revised and no longer requires MNE Groups to prepare a country-by-country reporting self-assessment after the selection stage.
ICAP is a voluntary risk assessment and assurance programme to facilitate open and co-operative multilateral engagements between MNE groups willing to engage actively and transparently and tax administrations in jurisdictions where they have activities.
By co-ordinating conversations between an MNE group and multiple tax administrations, ICAP supports the effective use of transfer pricing documentation, including the MNE group’s Country-by-Country report, providing a faster, clearer and more efficient route to improved multilateral tax certainty. ICAP should reduce the resource burden on both MNE groups and tax administrations, meaning fewer disputes requiring resolution through mutual agreement proceedings. Where an area is identified as needing further attention, work conducted in ICAP can improve the efficiency of compliance action taken outside the programme, if needed.
The updated sections are as follows:
4. What are the ICAP application deadlines?
An MNE group may submit an application to enter ICAP at any time. ICAP previously had biannual application deadlines – 31 March and 30 September. Following feedback from MNE groups that have participated in ICAP, it was decided to remove these application deadlines and allow for applications on a rolling basis. This is intended to simplify the process for MNE groups interested in joining ICAP, which may have found the previous application deadlines restrictive.
5. What are the target timeframes for ICAP?
ICAP is broken into three stages, each with a corresponding target timeframe as follows: –
- Selection stage: 8 – 12 weeks
- Risk Assessment stage (including issue resolution, where applicable): 30 – 45 weeks
- Outcomes stage: 6 – 8 weeks
14.What is the MNE group’s role in determining the scope of an ICAP risk assessment?
An MNE group’s preferences regarding covered tax administrations and covered transactions will be taken into consideration by the relevant tax administrations in deciding the scope of an ICAP risk assessment. For example, during the selection stage, an MNE group is required to identify the tax administrations participating in ICAP that it would like to include as covered tax administrations and may propose to limit the scope of the ICAP risk assessment to include a specific line of business, geographic area, and/or function that is common across several participating ICAP jurisdictions (e.g., marketing and distribution).
Even where an MNE group indicates its preferred scope of an ICAP risk assessment, it is still required to submit a complete selection documentation package that covers all ICAP jurisdictions and transactions to ensure that tax administrations can evaluate the impact of the proposed scope limitations on their ability to perform an effective risk assessment. A complete overview of the MNE group’s operations will enable the relevant tax administrations to understand the requested scope limitations within the broader context of the MNE group’s global operations. An MNE group that intends to propose a limited scope ICAP risk assessment should consult its proposed lead tax administration prior to submitting a selection documentation package. It is important for the MNE group to carefully consider the advantages and disadvantages of a limited scope ICAP risk assessment.
