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Multilateral-APA-Like Program to Create International Tax Certainty for Pilot Participants

On January 23, 2018, the International Compliance Assurance Programme (ICAP) was launched at an orientation event in Washington, DC. The ICAP pilot is a voluntary program in which the participants will use country-by-country reporting and other information to establish multilateral agreements in order to establish early tax certainty and assurance. The ICAP handbook can be found here.

The pilot program includes eight Organisation for Economic Co-operation Development (OECD) Forum on Tax Administration (FTA) member tax administrations and eight multinational entities (one headquartered in each of the eight countries including: Australia, Canada, Italy, Japan, the Netherlands, Spain, the United Kingdom and the United States). Under the program, the participant will engage with several jurisdictions at once in order to efficiently establish and address the specific international tax risks posed by its transfer pricing and permanent establishments. The tax administrations will jointly review the information supplied by the participant and will coordinate any follow-up questions. The participant can then engage with the tax administrations simultaneously, preventing the need for multiple APAs and resulting in fewer disputes.

Initially the participant will provide a package of documentation either to the tax administration in its headquarter jurisdiction or to each participating tax administration directly. Approximately six weeks after the documentation is provided, a kick-off meeting will be held between the participant and all of the participating tax administrations. Each participating tax administration will then conduct an assessment of the transfer pricing and permanent establishment risks. Finally, each participating tax administration will issue an outcome letter setting forth the areas where that administration has been able to gain assurance and identifying tax risks that remain. Participating multinational entities are expected to receive tax assurance for the 2018 and 2019 filing periods.

The pilot ICAP handbook lays out a specified timeframe for each of the phases and some ICAP risk assessments may be completed in at little as 17 weeks. It is expected that all cases be complete within 12 months. The lessons learned from the pilot will be shared with other FTA member tax administrations with a view to a possible roll-out of a broader ICAP following the pilot.

Practice Point: ICAP has the potential to provide tax certainty in multiple jurisdictions, which could be of great benefit to multinational taxpayers. We look forward to following the progress of this new program.

© 2020 McDermott Will & EmeryNational Law Review, Volume VIII, Number 36

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About this Author

K. Christy Vouri, tax, international, world, attorney, McDermott Will, law firm
Associate

K. Christy Vouri is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Washington, D.C., office.  She focuses her practice on U.S. and international taxation. Prior to joining McDermott, Christy served as a law clerk to Judge Robert A. Wherry, Jr. in the United States Tax Court.  She is an adjunct professor of tax practice and procedure litigation at the Georgetown University Law Center.

202-756-8817
Elizabeth Erickson McDermott Will Emery Law Firm Tax Attorney
Partner

Elizabeth Erickson is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm's Washington, D.C., office.  She is a member of the U.S. & International Tax Practice Group, and focuses her practice on tax controversies, including tax litigation. She has extensive experience in resolving domestic and international tax matters at all stages of dispute, including Internal Revenue Service examinations, administrative appeals, and litigation in the US Tax Court and district courts. She has advocated for clients before the Internal Revenue Service National Office, negotiated Advance Pricing Agreements with the Internal Revenue Service and other tax authorities, and resolved disputes through the Competent Authority process.

Elizabeth also advises clients on tax planning matters, including captive insurance arrangements and the tax treatment of settlement payments and legal fees (including tax reporting requirements).

Elizabeth is the hiring partner for the Washington, DC office, and is a former co-chair of the Firm’s Pro Bono and Community Service Committee for the Washington, DC office. She speaks frequently on tax controversy matters for professional organizations and is an editor of the Firm’s Tax Controversy 360 blog.

 

202-756-8097