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Adoption of the CbC rules – with a twist
Taxand Canada explains and advises on the new country-by-country rules.
Canada released draft legislative proposals for public comment on 29 July 2016 that would implement the country-by-country reporting requirements for large multinational enterprises. The proposed rules are consistent with the guidance issued by the Organisation for Economic Co-operation and Development under Action 13 of its base erosion and profit shifting initiative, with the addition of a penalty provision.
The rules will apply to multinational enterprises with total annual consolidated group revenues of more than €750 million for fiscal years that begin after 2015. Currently, the Canadian draft legislation deals solely with country-by-country reporting obligations; it remains to be seen whether Canada will implement other transfer pricing developments, including the master file and local file requirements.
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With Canada’s clear endorsement of the OECD recommendations, it is incumbent on MNE taxpayers to evaluate their data collection processes to ensure preparedness for the new CbC reports. In some cases, this may require information systems updates to ensure compliance within the proposed timelines.