On 29 January 2024 the OECD released the first aggregated statistics from the Forum on Tax Administration’s International Compliance Assurance Programme (ICAP).
ICAP
The ICAP is a voluntary risk assessment and assurance program whose objective is to facilitate greater cooperation in tax compliance issues between multinationals and the tax administrations of the countries where they operate. The ICAP facilitates discussions between the multinationals and tax administrations and promotes the effective use of transfer pricing documentation, including the use of the master and local file and the country-by-country report, to provide more information for the tax administration and achieve greater certainty for the taxpayer.
The original ICAP pilot program was launched on 23 January 2018 with participation by eight tax administrations. The risk assessment of multinationals through the ICAP program commenced in the first half of 2018, and later a second pilot program (ICAP 2) was held with participation by 19 tax administrations. On 8 December 2020 the FTA agreed that the ICAP would be made into an established program, with an expanded number of countries involved.
The International Compliance Assurance Program Handbook for Tax Administrations and MNE groups was issued by the OECD on 18 February 2021. The publication outlines the important features of the ICAP.
At October 2023 a total of 22 countries were participating in the ICAP program, and Portugal also joined in January 2024. The website of the OECD’s Forum on Tax Administration includes a list of participating countries in the ICAP and a list of answers to frequently asked questions.
ICAP statistics
The ICAP statistics cover all cases that were completed by October 2023, including the ICAP pilots. The statistics set out an overview of the jurisdictions and topics covered by the risk assessments; the time taken for completion; and aggregated data on the outcomes of the risk assessments.
The document also looks at the relationship between ICAP and other ways in which taxpayers can obtain tax certainty. The other possibilities include advance pricing arrangements (APAs) and mutual agreement procedures (MAPs). The publication discusses how the different tax certainty tools relate to each other and how they could be used together to manage tax risk.
The statistics indicate that 20 ICAP cases were completed by October 2023, and more cases are currently in progress. The average time taken to complete the process and issue the risk assessment outcome to the taxpayer was 61 weeks. This is higher than the target timeframe of 52 weeks set out in the ICAP handbook, however the longer time required may partly reflect the impact of the pandemic on the second ICAP pilot.
The largest ICAP risk assessments to date involved nine tax administrations, while the smallest risk assessment involved three tax administrations. The average number of tax administrations involved in a risk assessment is five.
The statistics indicate that for 40% of participating multinational groups all the main transfer pricing risk areas were considered to be low risk by all the tax administrations that included them in their risk assessment. Permanent establishments received the highest proportion of low-risk outcomes, being considered low risk in 95% of cases where the issue was part of a tax administration’s risk assessment. In the case of other transfer pricing issues the low risk outcomes were 90% for tangible property; 88% for intragroup services; 76% for financing; and 75% for intangible property.
Participation in the ICAP
The ICAP Handbook outlines the selection process through which multinationals can apply to participate in the ICAP program. A multinational considering participation can contact the tax administration in the jurisdiction where its ultimate parent entity is resident. The next application deadline for submission of an application to participate in the ICAP is on 31 March 2024, and there is a further deadline on 30 September 2024.
