Executive summary

On 29 January 2025, the Organisation for Economic Co-operation and Development (OECD) Forum on Tax Administration updated its website to publish additional information regarding the Main Documentation Package for participation in ICAP, which is to be submitted following the end of the selection stage and before the commencement of the risk assessment stage. The OECD's website now includes the following templates for the Main Documentation Package:

• Main Documentation Package - Checklist
• Covered Transactions Schedule

Furthermore, the requirement to prepare a Country-by-Country Reporting (CbCR) self-assessment as part of the Main Documentation Package has been eliminated.

Detailed discussion

Background

ICAP is a voluntary risk assessment and assurance program through which multiple tax administrations come together to simultaneously risk assess a multinational enterprise (MNE). The participating tax administrations provide participating MNEs a level of tax certainty through audit protections in relation to covered transactions for a specified period, if the MNEs are considered to be low risk.

The first ICAP pilot was launched in January 2018 with eight tax administrations. The second pilot began in March 2019 with 19 tax administrations. ICAP became a full program in September 2021, and 23 jurisdictions currently participate. The operation of the program is covered by the ICAP handbook and the OECD published the first ICAP statistics in January 2024.¹ Frequently Asked Questions (FAQs) about ICAP are periodically updated and include information about the benefits of ICAP, the level of comfort provided, factors to be considered in deciding whether an MNE group is suitable for ICAP and how to apply to ICAP.²

The information to be provided when applying to ICAP includes materials that an MNE is expected to maintain as part of its regular transfer pricing compliance cycle, as well as additional information prepared specifically for the ICAP application, for which the OECD has published templates on its website.

The required information is split into two sections, the (1) Selection Documentation Package and (2) Main Documentation Package. Details of the Selection Documentation Package were published in July 2024.³ The components are:

• The MNE group information form (template available)
• The covered-risk overview (template available)
• The Country-by-Country report for the most recent period
• The transfer pricing Master File for the most recent period
• A summary of the MNE Group's current global structure (if not included in Master File)
• A list of advance pricing agreements (APAs) and tax rulings (template available)

On its website, the OECD also has published a template for an ICAP Outcome Letter. The template notes that tax administrations will adapt the template to satisfy their own domestic legal requirements, but the structure of outcome letters will broadly follow the template.

Update to Main Documentation Package

The Main Documentation Package consists of two parts, the (1) Main Document Package — Checklist and (2) Covered Transactions Schedule.

Main Document Package — Checklist

The checklist sets out the information that should be submitted after the selection stage:

• Updates to any documentation provided as part of the Selection Documentation Package
• The Covered Transaction Schedule (template available)
• The transfer pricing Local Files (or equivalent information) for all Covered Periods
• Audited consolidated financial statements for all Covered Periods
• The Tax Strategy of the MNE Group, including details of its Tax Control Framework⁴ (if documented)
• A value chain analysis for the MNE group
• Permanent Establishment documentation

The update to the Main Documentation Package states that a CbCR self-assessment is no longer required as part of the Main Documentation Package.

Covered Transaction Schedule

The OECD has published on its website a template spreadsheet covering the information required regarding the Covered Transactions of the MNE applicant for each of the Covered Periods, including:

• The legal entities that are parties to the Covered Transactions
• The Tax Identification Numbers of the legal entities
• The countries of tax residence of the parties to the Covered Transactions
• A brief description of the Covered Transactions
• Whether the Covered Transactions are subject to an APA
• The value of the Covered Transactions
• The transfer pricing method applied
• Benchmarking ranges and the tested parties used in applying the transfer pricing method
• The actual results of the Covered Transactions
• An explanation of any changes between Covered Periods, if applicable.

Local Files for all Covered Periods

Transfer pricing Local File documentation for all entities in each of the Covered Jurisdictions is to be provided for all Covered Periods. Where there is no requirement to prepare a Local File in a Covered Jurisdiction, equivalent information and documentation may be provided.

Audited Consolidated Financial Statements for all Covered Periods

Where audited consolidated financial statements are not produced, unaudited consolidated financial statements or trial balances should be provided.

Value Chain Analysis for the MNE Group

Unless already covered in the Master File, a value chain analysis for the MNE group, consisting of an explanation of the external and internal profit drivers and how profits align to economic activity, is to be provided. If value drivers differ significantly, this analysis should address the MNE group's five largest product and service offerings.

Permanent Establishment (PE) documentation

The required PE documentation consists of:

• A schedule of all reported PEs and non-trading branches
• A list of all protective filings regarding PEs and non-trading branches in the covered jurisdictions, which should include a brief description of activities that resulted in the protective filing and the basis for claiming treaty benefits under the business profit and PE articles
• Financial data for the PEs, including revenue, income, expenditure, assets and liabilities
• Transfer pricing documentation (e.g., functional analysis) demonstrating the attribution of profits to the PEs

Implications

The update to the Main Documentation Package provides practical information regarding the requirements of ICAP. Furthermore, the elimination of the requirement to prepare a CbCR self-assessment simplifies the application process. Companies should review the updated materials if they are considering participation in ICAP.

Obtaining greater tax certainty by utilizing the various dispute prevention and resolution mechanisms currently available is a critical aspect of tax and business risk management in today's constantly changing environment. In this regard, ICAP and joint audits were cited during the November 2024 OECD Tax Certainty Day⁵ as having generated significant results, as reflected in the ICAP statistics. Going forward, tax certainty mechanisms will play an important role for both taxpayers and tax administrations in the implementation and administration of the Pillar Two global minimum tax rules.