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Canada Releases CbC Reporting Legislation

by Mike Godfrey,, Washington

02 August 2016

Canada's Finance Department has released for comment draft legislative proposals that would implement 2016 Budget measures, including a new country-by-country reporting requirement.

The legislation would introduce CbC reporting requirements into Section 233 of the Income Tax Act. Canadian ultimate parent entities with annual consolidated group revenues of over EUR750m are required to file CbC reports annually, documenting their revenue, profit, taxes paid and accrued, number of employees, capital, retained earnings, and tangible assets for each tax jurisdiction in which they do business. In certain situations, the report would also be required to be filed by a Canadian-resident constituent entity of an MNE group that is not the ultimate parent entity of the MNE group.

The draft rules include provisions to allow a surrogate parent entity to file a CbC report instead of the ultimate parent entity. To qualify, a surrogate parent entity of the MNE group must file a report in respect of the reporting fiscal year with the tax authority of its jurisdiction of tax residence on or before the filing date. In addition, the jurisdiction of tax residence of the surrogate parent entity must meet certain requirements.

A CbC report in respect of a reporting fiscal year of an MNE group would need to be filed within 12 months from the last day of the reporting fiscal year. However, if notification of systemic failure has been received by the constituent entity, this deadline can be extended to 30 days after receipt of the notification. This takes into account situations where a constituent entity has been informed of a systemic failure beyond the period within which it could meet the 12-month deadline, the guidance explains.

The new reporting requirement is intended to apply from January 1, 2016.

The new reporting requirement, as well as other Budget 2016 measures, are to be included in a bill to be tabled in Parliament following the consultation period, which will end on September 27, 2016.

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