On 18 February 2021 the OECD issued the International Compliance Assurance Programme Handbook for Tax Administrations and MNE groups.

The International Compliance Assurance Programme (ICAP) was set up as a voluntary risk assessment and assurance programme 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 a pilot program was launched for the ICAP, including the tax administrations of Australia, Canada, Italy, Japan, the Netherlands, Spain, UK and US. The risk assessment of the multinationals began in the first half of 2018. The second pilot scheme (ICAP 2.0) included 19 tax administrations.

On 8 December 2020 the OECD’s FTA agreed that ICAP would become an established programme to assess the transfer pricing risk of multinational enterprises, with an expanded number of tax administrations involved.

Handbook

The handbook draws on the feedback received from tax administrations and multinational groups participating in the pilots. The handbook outlines the drivers behind ICAP and compares it to other tools to obtain tax certainty such as advance pricing agreements (APAs), standardised risk assessment documentation and the improvements introduced to the mutual agreement procedure.

The handbook also outlines the selection process by which multinationals can apply to take part in the ICAP programme. The taxpayer completes a selection documentation package in which it indicates the tax administrations that would be covered administrations for the purposes of its risk assessment. The preferences will be taken into account but are not final. Following review of the documentation package the tax administration will send it to the other tax administrations to be covered in the arrangement.

At the risk assessment stage the lead tax administration conducts an assessment of the covered risks. This should be completed in less than 20 weeks. At the outcomes stage the lead tax administration issues a completion letter confirming that the ICAP risk assessment and assurance process has finished, and each covered tax administration issues an outcome letter with the results of the risk assessment for the relevant periods. The outcomes stage is targeted to be completed within four to eight weeks.

The handbook outlines the risk assessment and assurance process and also gives details of the ICAP documentation package.

Next Steps

The OECD will make available additional information on the ICAP webpage in March 2021. This will include further frequently asked questions and a list of the participating tax administrations. The first application deadline for multinationals intending to participate in ICAP is 30 September 2021.