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June 7, 2024

OECD releases updated FAQs for MNEs participating in ICAP risk assessments

  • The updated FAQs clarify how multinational enterprises (MNEs) can participate in ICAP even if their ultimate parent company is not in a jurisdiction that participates in ICAP.
  • The FAQs also describe the option of subjecting only a segment of an MNE group to an ICAP risk assessment.
  • In general, the FAQs describe an increase in the options available, which may allow more MNEs to participate in ICAP.

On 5 June 2024, the Organisation for Economic Co-operation and Development (OECD) Forum on Tax Administration released updated frequently-asked-questions-and-answers (FAQs) on participating in the International Compliance Assurance Program (ICAP). The updated FAQs clarify, among other things, how multinational enterprises (MNEs) can use surrogate lead tax administrations (surrogate LTAs) from different jurisdictions, how ICAP can be applied on a segment of an MNE group and the availability of ICAP to taxpayers below the Country-by-Country-Reporting (CbCR) threshold.

In May 2024, the OECD also published information on participating tax administrations, which contains ICAP contact information for each of the twenty-three participating tax administrations. It also contains helpful information for each tax administration such as composition of the ICAP team, covered periods, ICAP scope and limitations, outcome letters and caveats and the approach to ICAP risk assessment process.


ICAP is a voluntary risk assessment and assurance program. Under ICAP, multiple tax administrations come together to simultaneously risk-assess an MNE. In return, the program offers MNEs a level of tax assurance that provides certain audit protections by the participating tax administrations regarding the MNE's low-risk covered transactions for a specified period.

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. Twenty-three jurisdictions currently participate in ICAP and the program is covered by the ICAP handbook.

FAQs about ICAP have been periodically updated, with the last FAQs including information about the benefits of ICAP, the level of comfort provided, the factors to be considered in deciding whether an MNE group is suitable for ICAP and how to apply (see Tax Alert 2021-0766).

FAQs updated June 2024

Periods covered by risk assessment (FAQ4)

According to the FAQs, the tax administration and MNE group will agree before the risk assessment on how many periods are covered, which is generally one or two consecutive periods. In addition, tax administrations "will typically" aim to provide comfort for "a number" of tax filing periods immediately following the covered periods, as long as no material changes occur during these periods. A tax administration's ability to provide this comfort to future tax periods will depend on its domestic legal framework.

Ultimate parent company headquartered in a different jurisdiction from MNE group (FAQ8)

If the tax administration for the ultimate parent entity (UPE) is unwilling to act as an LTA, or if it is not included in the list on the OECD website, the ICAP handbook stipulates that the MNE group may invite a tax administration in another jurisdiction where the group has significant activities to act as a surrogate LTA.

The updated FAQs reinforce that an MNE group with a UPE headquartered in a jurisdiction that does not participate in ICAP may still be able to use ICAP through a surrogate LTA that participates in ICAP. The MNE group would have to (1) identify a jurisdiction with sufficient familiarity with the MNE group to be an effective surrogate LTA and in which the MNE group has significant operations; (2) inform the tax administration in the UPE's jurisdiction of its desire to participate in ICAP and (3) contact the potential surrogate LTA to discuss its suitability. The potential surrogate LTA may then agree, decline or suggest an alternative surrogate LTA.

For a surrogate LTA, the FAQs recognize that it may be more appropriate for an ICAP risk assessment to be undertaken for a discrete segment of the MNE group. For example, assessing a segment of the group may be appropriate where the holding company of a segment is located in the jurisdiction of a tax administration participating in ICAP, and other participating tax administrations are satisfied that the segment is sufficiently operationally independent from the rest of the MNE group to undertake an ICAP risk assessment effectively.

Generally, the FAQs recognize that only a segment of the MNE group can be subject to an ICAP risk assessment but note, in that situation, the UPE should support the process and provide any necessary information.

Tax administration of UPE declines risk assessment (FAQ9)

If an MNE group's UPE is in a jurisdiction that participates in ICAP, the MNE group should always first approach the tax administration in the UPE's jurisdiction for a risk assessment. If that tax administration declines, then the MNE group may approach another jurisdiction participating in ICAP to serve as a surrogate LTA.

In that situation, the following steps are required:

  • The MNE group must inform the tax administration of the UPE jurisdiction that it intends to use a surrogate LTA
  • The potential surrogate LTA must confirm with the tax administration in the UPE's jurisdiction that it declined the request due to lack of capacity or the fact that the MNE group only has limited activities in that jurisdiction
  • The tax administration in the UPE jurisdiction must approve the MNE group's use of a surrogate LTA, otherwise the ICAP risk assessment cannot proceed for those periods
  • The MNE group can ask the tax administration in the UPE jurisdiction again in the future

Additional ICAP risk assessments (FAQ10)

If an MNE group has already participated in an ICAP risk assessment, it can submit a request for another risk assessment for later periods by the same or different tax administrations, or a combination of the two. There is no minimum period between requests. MNE groups, however, "are encouraged" to contact their LTA before submitting a new request to discuss their suitability to reenter ICAP and the possible scope of a further risk assessment.

MNE group below threshold for CbC reporting (FAQ11)

Generally, a CbC report is required when applying for an ICAP risk assessment. However, MNE groups that are exempt from mandatory CbC reporting can still apply for an ICAP risk assessment. To do so, an MNE group must prepare a similar report with all the required information. A tax administration may "exceptionally" agree to start the selection stage without the report being available, but the report would still have to be provided as part of the main documentation package. "This may be most suitable for MNE groups that anticipate coming within the scope of CbC reporting in future, or that fall above the threshold in some [p]eriods and not others."

Use of external advisors (FAQ12)

External tax and/or legal advisors can assist an MNE group during the ICAP risk assessment. They should not be used, however, as a replacement for personnel from the MNE group.


The information on participating tax administrations and the updated FAQs together provide helpful practical information on ICAP. For MNEs, it is important to understand that there is some flexibility when entering ICAP, either in relation to an LTA or covered segment of the business. It is also good to know that ICAP is an option for smaller MNEs. Participating countries apply ICAP slightly differently, but the information is helpful in understanding the differences.

Tax certainty is critical in today's constantly changing environment; businesses can seek to secure tax certainty by exploring ways to manage tax risks while also utilizing the various available dispute prevention and resolution mechanisms.1 Tax certainty mechanisms will play an important role for both taxpayers and tax administrations in both implementation and ongoing administration of the Pillar Two global minimum tax rules. Various MNEs shared their positive experiences and benefits achieved from participation in ICAP during the latest OECD Tax Certainty Days.2

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1 See EY Global Tax Alert OECD publishes ICAP statistics.

2 See EY Global Tax Alerts OECD holds Tax Certainty Day addressing MAP developments and tax certainty under Pillars One and Two and OECD holds Tax Certainty Day addressing MAP developments and updates on tax certainty efforts.

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Contact Information

For additional information concerning this Alert, please contact:

Ernst & Young LLP (United Kingdom)

Ernst & Young LLP (United States)

Ernst & Young LLP (Canada)

Ernst & Young Belastingadviseurs LLP

Ernst & Young Solutions LLP (Singapore)

Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor