ICAP
Recent updates – OECD International Compliance Assurance Programme (ICAP)
OECD has recently published an updated document (FAQ) in respect of International Compliance Assurance Programme (ICAP/Programme), which commenced on September 2021.
What is ICAP?
ICAP is a voluntary risk assessment & assurance process designed to be an efficient and effective tool to facilitate MNE Groups achieve increased tax certainty with respect to their activities/transactions concerning transfer pricing and other international tax matters(hybrid mis match arrangements, withholding taxes, treaty benefits).
At present only 23 tax administrations have participated in ICAP. To benefit MNCs Headquartered in jurisdictions which are currently not a participant of the ICAP process, the FAQ addresses this critical issue and provides an alternative in terms of another tax administration to act as a Surrogate Lead Tax Administration.
For e.g Take a case of a MNC headquartered in India having subsidiaries across the world. As India is not a participating jurisdiction, those MNCs were not able to opt for the ICAP process. Given this clarification in FAQ for a Surrogate Lead Tax Administration, these MNCs are now eligible to approach alternative tax administration where it has significance presence to be a surrogate Lead tax administration. Considering that there is no filing fees, shorter timeline (24-28 weeks) for an outcome letter, submission of documentation already maintained by the Group (CbC, masterfile, local file etc), it can be as an effective tool for increasing tax certainty.
In the attached newsletter we have captured the background of ICAP , process, the recent clarifications in the FAQ, difference between APA and ICAP and the way forward.
OECD has also released a document of information on the participating tax administrations and their contact details so that MNC desirous of entering into this process can reach out before the application deadline of 30 September 2024. Generally applications are accepted at one of the two annual application deadlines –31 March and 30 September