This lesson examines cooperative compliance approaches that facilitate multilateral risk assessment and assurance for multinational enterprises, with a focus on the OECD’s International Compliance Assurance Programme.

• The Concept of Cooperative Compliance: Cooperative compliance involves active engagement between tax administrations and taxpayers to achieve timely, transparent, and mutually beneficial outcomes. It recognises that voluntary compliance is enhanced when taxpayers have certainty about their tax positions.

• The International Compliance Assurance Programme (ICAP): ICAP is a voluntary programme initiated by the OECD to facilitate a multilateral cooperative approach to international tax risk assessment and assurance. It involves collaboration between tax administrations and MNE groups, focusing on transfer pricing and permanent establishment risks .

• The ICAP Process: The risk assessment process, carried out uniformly among participating tax authorities, is designed to determine the risk rating of covered transactions. Transactions classified as low risk are exempt from further inquiries. The foundation is transfer pricing documentation, particularly Country-by-Country Reporting data .

• ICAP Updates (December 2024): The OECD Forum on Tax Administration released updated ICAP FAQs introducing major updates:

  • Flexible application timing: MNEs can now apply at any time, eliminating previous biannual deadlines.

  • Extended timelines: Target timeframes adjusted: selection stage (8-12 weeks), risk assessment (30-45 weeks), outcome stage (6-8 weeks).

  • Defining scope of assessment: MNEs can now propose a narrower scope, such as focusing on specific business lines, geographic areas, or functions .

• ICAP Benefits: ICAP is particularly useful for multilateral cases applying uniform transfer pricing models across multiple jurisdictions and for centralised intragroup services. It offers less certainty than bilateral APAs but is more time-efficient. Widespread adoption could contribute significantly to enhancing multilateral tax certainty and reducing conflicts among tax administrations .

• ICAP and National Cooperative Compliance: ICAP complements national cooperative compliance programmes, which are inherently unilateral, by enhancing their benefits. Confirming a transaction as low risk through ICAP may indirectly validate the same transfer pricing model across all participating jurisdictions .