Canadian Competent Authority Update

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Those who have used the competent authority process over the past decade, whether for an advance pricing arrangement (APA) or for the resolution of double taxation, will likely agree that the experience can be described as anything but fast. Explanations of why cases move so slowly vary, the most common including strained relations between the case officers negotiating the cases, aggressive positions taken by Canada and excessive delays in providing position papers.

This paper discusses recent activity undertaken by the Canadian Competent Authority to advance the handling of cases through improvements to its own APA program and its relations with its counterpart in the United States. Also discussed are broad-based solutions to resolving competent authority processes in a timely manner-namely, the introduction of an arbitration paragraph to the Organisation for Economic Cooperation and Development (OECD) model tax convention and the publication of the 24 best practices offered as guidance to taxpayers and administrators. Because much of what the Canada Revenue Agency (CRA) adopts is derived from the OECD, these changes may affect the competent authority process both currently and in the future.