Canada’s Country-by-Country Reporting (CbCR) requirements are aligned with the OECD’s Base Erosion and Profit Shifting (BEPS) Action 13 framework. The legislation, overseen by the Canada Revenue Agency (CRA), mandates multinational enterprises (MNEs) with significant operations in Canada to provide transparent financial information. This guide details the requirements and implications of Canada’s CbCR rules, including applicability, filing deadlines, penalties, and relevant resources, to help finance directors ensure compliance.

Applicability of CbCR in Canada

Criteria for Reporting:

• CbCR obligations apply to multinational enterprise (MNE) groups if:
  • The group’s annual consolidated revenue is equal to or exceeds €750 million (approximately CAD 1.1 billion) in the previous fiscal year.
  • The ultimate parent entity (UPE) is a Canadian tax resident, or a Canadian entity is part of an MNE group and the UPE is located in a jurisdiction that either does not require CbCR, lacks a qualifying agreement with Canada, or has failed in information exchange.

Relevant Legislation:

• Canada’s CbCR rules are stipulated in Section 233.8 of the Income Tax Act, with accompanying guidance from CRA’s Memorandum on transfer pricing. These regulations align with international standards set by the OECD to increase transparency among MNEs operating within Canada.

Reporting Requirements

Information to be Reported:

• The CbC report requires MNEs to provide jurisdiction-specific financial data, including:
  • Total revenue, segmented into related and unrelated party transactions,
  • Profit or loss before income tax,
  • Income tax paid and accrued,
  • Stated capital and accumulated earnings,
  • Number of employees,
  • Tangible assets, excluding cash or equivalents.
• Each entity within the group must also be identified by jurisdiction with details on its primary activities.

Form and Submission:

• The CbC report must be filed using Form RC4649, Country-by-Country Report and submitted electronically through the CRA’s online portal, My Business Account. Detailed guidance on submitting reports is available on the CRA website: CRA – CbCR Resources.

Filing Deadlines

• The CbC report is due within 12 months following the last day of the fiscal year. For instance, if the fiscal year ends on 31 December 2023, the CbC report must be filed by 31 December 2024.
• Additionally, Canadian constituent entities of MNEs must notify the CRA of the designated reporting entity by the last day of the fiscal year.

Penalties for Non-Compliance

Penalties:

• Canada enforces strict penalties for non-compliance, including:
  • CAD 500 per month for late filing, up to a maximum of CAD 6,000 for failure to submit a complete CbC report.
  • Further penalties and potential audits may apply if inaccurate or misleading information is provided.

Defences:

• CRA may assess penalties with consideration of reasonable cause for non-compliance. However, MNEs are expected to adopt adequate compliance measures.

Confidentiality and Use of Information

Data Protection:

• The CbC report is used by the CRA for risk assessment and transfer pricing purposes, and confidentiality is strictly maintained according to OECD standards.
• Canada participates in the automatic exchange of CbC reports with countries that have signed Multilateral Competent Authority Agreements (MCAAs) with Canada, ensuring mutual compliance with confidentiality and data protection.