The OECD is holding virtual Awareness Sessions on 30 March 2021 and 1 April 2021 for multinational groups looking for more information on the International Compliance Assurance Program (ICAP).

Background

The ICAP was set up as a voluntary risk assessment and assurance program aiming to facilitate greater cooperation between multinational groups and the tax administrations of the countries where they operate. The ICAP facilitates the coordination of discussions between the multinationals and tax administrations and promotes the effective use of transfer pricing documentation, including the master and local file and the Country-by-Country report, to achieve greater certainty for the taxpayer.

Pilot Programs

On 23 January 2018 an ICAP pilot program was launched, with participation by the tax administrations of Australia, Canada, Italy, Japan, the Netherlands, Spain, UK and US. The risk assessment of multinationals in the pilot program began in the first half of 2018. A second pilot program (ICAP 2) was held with more participating tax administrations.

Established ICAP Program

On 8 December 2020 the OECD’s FTA agreed that ICAP would become an established program to assess the transfer pricing risk of multinational enterprises, with an expanded number of tax administrations involved. A total of 19 countries are now involved. In addition to the countries originally involved in the ICAP pilot the participants also include Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Luxembourg, Norway, Russia and Singapore.

The OECD has published on its website a list of frequently asked questions from MNE groups on the ICAP.

Handbook

On 18 February 2021 the OECD issued the International Compliance Assurance Program Handbook for Tax Administrations and MNE groups. The publication sets out the main factors behind ICAP and looks at its advantages or disadvantages compared to other ways that can be followed to obtain tax certainty such as advance pricing agreements (APAs), the standard risk assessment documentation and the mutual agreement procedure.

The handbook sets out the selection process by which multinationals can apply to take part in the ICAP program. The taxpayer should complete a selection documentation package indicating the tax administrations that would be covered administrations for the purposes of its risk assessment. Following review of the documentation package the tax administration will send it to the other tax administrations intended to be covered in the arrangement.

Following risk assessment, which should be completed in less than 20 weeks, a letter will be issued confirming that the ICAP risk assessment and assurance process has finished, and the taxpayer will received an outcome letter from each covered tax administration with the results of the risk assessment.

Applications

MNE groups willing to discuss possible participation in the ICAP should contact the tax administration in the jurisdiction where their ultimate parent entity is resident. The next application deadline is 30 September 2021. There are further deadlines for submission of an application to participate in ICAP on 31 March 2022 and 30 September 2022.