The Canada Revenue Agency (CRA) issued the latest mutual agreement procedure (MAP) program report on April 13, 2018. The MAP program is a service provided by the CRA to assist taxpayers in resolving cases of double taxation or taxation not in accordance with the provisions of a tax convention. The MAP process needs co-operation from taxpayers to achieve the goal of resolving such cases. Beginning in 2016, MAP reporting has been done for calendar years instead of fiscal years. Because 2016 was the transitional year for reporting, MAP results are incorporated for the fiscal year ending 31 March 2016, and the calendar year 2016. This report explains the objective, history, and recent events that are structuring the future of the MAP program. Also, the CRA encourages taxpayers subject to double taxation or taxation not in accordance with an income tax treaty to consider the MAP program. The summary of this report is given below:
- The CRA had 260 MAP cases on January 1, 2016. During 2016, the CRA accepted 124 new MAP cases and closed 160 MAP cases
- Of the 160 cases closed, 116 cases (72%) resulted in full exemption from double taxation after discussions with other competent authorities, 16 cases (10%) resulted in unilateral relief granted, 2 cases (1%) resulted in partial relief and 26 cases (17%) resulted in other outcomes.
- Of the 160 cases closed in 2016, 137 (86%) were initiated by Canada and 23 (14%) were initiated by other countries. The average time to complete a negotiable MAP case was 20.87 months.
- The transactional net margin method (TNMM) continued to be the most frequently employed transfer pricing methodology. The TNMM was used in 67% of the closed cases. The cost plus and the comparable uncontrolled price (CUP) methods were the next most popular methods being used in 9% and 7% of cases, respectively. The profit split and resale price methodologies were used in 1% of cases for each category.
The Canada Revenue Agency is updating its MAP guidance (IC71-17R5) and will issue an updated version of IC71-17R5.