The aim of the ICAP programme is to provide tax certainty in specific transactions and activities (typically involving transfer pricing and permanent establishment), though it does not provide an MNE with the legal certainty that can be achieved through advanced pricing agreements. What it does achieve is assurance where tax administrations participating in an MNE’s risk assessment, consider a covered risk to be a low risk.
Where an area is identified as needing further attention, this is communicated at an early stage and the MNE is therefore provided with an opportunity to use these insights to mitigate risks. As a result, work conducted in ICAP reduces the resource burden on both MNEs and tax administrations as well as reducing the number of instances where a case results in dispute.
In most cases, an MNE’s risk assessment and assurance will be completed within 24-28 weeks of the MNE providing the main ICAP documentation package at the start of the risk assessment stage.
ICAP 2.0 encompasses the successes of the first pilot, including a single documentation package, clear and defined timeframes for each stage and a well-defined engagement plan across the different tax administrations participating in the MNE’s risk assessment.
Improvements made by ICAP 2.0 include the following: