Interpretive relevance of BEPS materials
Interpretation of Canadian CbCR legislation
[T]he Canadian CbCR legislation generally conforms to the OECD model legislation. Therefore, an understanding of the BEPS Action 13 Final Report is useful to interpreting the Canadian CbCR legislation and it should be read in conjunction with this guidance.
Filing apportionment where takeover
Change of UPE during a fiscal year
[W]here the UPE of an MNE group, that is not an excluded MNE group, changes in a fiscal year, the CRA expects the following to apply:
- The UPE of the acquired MNE group should file a CbC report including data for that MNE group up to the date of takeover.
- The parent entity of the acquirer MNE group should file a CbC report as normal for its fiscal year. That CbC report will include data for the CEs of the acquired MNE group from the date of acquisition until the end of the fiscal year.
GAAP determines whether investment fund investees are part of MNE group
Rules for investment funds
If, applying accounting rules, an investment entity does not consolidate investee companies, then those investee companies should not form part of an MNE group and should not be considered CEs. However, if the accounting rules require that the investment entity consolidates with an investee company, the investee company should be part of an MNE group (where one exists) and should therefore be considered a CE.
No exemptions other than for under €750M
Exemptions from filing in Canada
The only exemption from filing is for an MNE group with consolidated group revenue below the €750 million threshold. There are no exemptions for any specific industries, investment funds, entities with tax exempt status, non-corporate entities or entities that are not publicly listed.
Choice of accounting data/administrative tolerance
Completing the CbC Report
…The reporting entity may choose to use data from its consolidation reporting packages, from separate entity statutory financial statements, regulatory financial statements, or internal management accounts. ...
As a general matter, the CRA intends to provide a reasonable degree of flexibility for MNE groups filing a CbC report in Canada in situations where guidance or interpretation on certain issues may not have been available at the time of filing, or where jurisdictions vary in their approaches to certain issues.
No reconciliation to consolidated financials
Reconciliation of the Country-by-Country Report to consolidated accounts
[I]t is not necessary to reconcile the revenue, profit and tax reported in the RC4649 to the consolidated financial statements.
Amounts in Cdn$/functional currency
Table 1 – Overview of allocation of income, taxes and business activities by jurisdictions
For electronic filing, all amounts must be stated in Canadian dollars [except that] ...[w]here the reporting entity has made an election under paragraph 261(3)(b) ... to use a functional currency, that currency may be used.
...Where the reporting entity’s currency for financial reporting purposes is not Canadian dollars, and they have not elected under paragraph 261(3)(b) of the Act to use a functional currency for the purposes of filing the CbC report, the reporting currency for financial reporting purposes may still be used when filing the CbC report providing that the following conditions are met:
- The reporting entity’s reporting currency for financial reporting purposes is a “qualifying currency” as defined in subsection 261(1) of the Income Tax Act.
- The reporting entity discloses in Table 3 – Additional Information that it is reporting in one of the qualifying currencies notwithstanding that no election has been made by the reporting entity pursuant to paragraph 261(3)(b) of the Act. If the amounts in Table 1 required conversion into one of the functional currencies, the conversion rate used should be set out in Table 3.
Reporting of entities that are resident nowhere
A stateless entity is a business entity that is organized under the laws of a particular country but that is not tax resident in any jurisdiction. A stateless entity may be the UPE of an MNE group; however, for all other purposes of the CbC report (Tables 1, 2 and 3), all financial and other data should be aggregated under the ‘X5’ (stateless) tax jurisdiction of residence.
Meaning of revenues
…Revenues should be interpreted in the broadest possible sense to include income from sales of inventory and properties, services, royalties, interest, premiums and any other amounts. Payments received from other CEs that are treated as dividends in the payor’s tax jurisdiction should be excluded. …
“Revenues-Related Party” should be read as the aggregate amount of revenues generated from transactions between constituent entities listed in Table 2, for each relevant tax jurisdiction. The financial results of all intercompany transactions within the same jurisdiction must be aggregated and not consolidated.