The Organization for Economic Co-operation and Development (“OECD”) has recently released its final report on Action 13 - Transfer Pricing Documentation and Country by Country (“CbC”) reporting, under its Action Plan on Base Erosion and Profit Shifting (“BEPS”).
Action 13 recommended a three-tiered approach to TP documentation as under:
- A “Master File” that provides tax administrations with high-level information on the global business operations and TP policies of a Multi-National Enterprise (“MNE”);
- A specific “Local File” that provides the local tax administration with information regarding material related-party transactions, amounts involved, and the company’s analysis of the TP determination’s in relation to those transactions;
- A “CbC reporting template” that includes information on the economic activity of the MNE group
CbC reporting was agreed as one of the minimum standards for implementing anti-BEPS measures. The Indian Government vide Finance Act, 2016 amended the Indian tax law (ITL) to introduce provisions for additional TP documentation and CbC reporting to implement the recommendations contained in the OECD’s BEPS report on Action 13. These provisions were expected to be followed up by detailed rules for implementation.
Accordingly, recently, the Indian tax administration has issued draft rules (Draft Rules) for CbC reporting and furnishing of master file for public comments/ suggestions.
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Particulars |
Masterfile |
CbCR |
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(i) Consolidated group revenue exceeding INR 500 |
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Crores ; and |
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(ii) Aggregate value of international transactions: |
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Threshold |
• during the reporting year, as per books of |
Consolidated group revenue |
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exceeding INR 5,500 Crores |
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accounts, exceeds INR 50 Crores; OR |
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• in relation to purchase, sale, lease, transfer or use |
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of intangible property, as per books of accounts, |
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exceeds INR 10 crores |
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Due date for |
On or before 31st March 2018 |
O n o r |
b e f o r e 3 0 t h |
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Financial Year |
• Form No. 3CEBA |
November 2017 |
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2016-17 |
• Form No. 3CEBE (if more than one constituent |
• Form No. 3CEBC |
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Forms for |
entity in India) |
• Form No. 3CEBD (if more |
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furnishing the |
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than |
one constituent |
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report |
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entity in India) |
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1 | P a g e
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The Indian tax administration has considered the above guidance and the Draft Rules are largely in line with the contents as prescribed under Action 13 report.
The Draft Rules, however, requires the following additional information:
- Maintenance of a list of all the operating entities of the international group along with their addresses;
- A description of the functions performed, assets employed and risks assumed by the constituent entities of the international group that contribute
- at least 10% of the revenues, assets and profits of the group;
- A list of all the entities of the international group engaged in development and management of intangibles along with their addresses;
- A detailed description of the financing arrangements of the international group, including the names and addresses of the top ten unrelated lenders;
- Filing procedures and the filing due dates
The Draft Rules prescribe a separate statutory form i.e. Form 3CEBA wherein the constituent entity should furnish the prescribed information. This form shall be furnished to the Director General of Income-tax (Risk Assessment) on or before the due date for furnishing the Income-tax return.
Further, in respect of the financial year (FY) 2016-17, the Draft Rules provide that the due date for furnishing master file information in Form 3CEBA is by 31 March 2018.
In case where there are more than one constituent entities of an international group resident in India, the Draft Rules provide for a single filing by a designated constituententity.
CbC reporting and its Contents
Under Action 13, the CbC reporting template requires MNEs to report the following revenue,profits, income tax paid and accrued, employees , stated capital, retained earnings and tangible assets annually for each tax jurisdiction they do business. In addition, MNEs are required to identify each entity within the group doing business in a tax jurisdiction and to provide an indication of the business activity each entity conducts.
The CbC reporting template is divided into three tables:
- Table I - Overview of allocation of income, taxes and business activities by tax jurisdiction
- Table II- List of all Constituent Entities of the MNE group included in each aggregation by tax jurisdiction, including designation of Main Business Activity
- Table III - Additional Information
The Draft Rules are in line with the above guidance and prescribe filing of economic information of the international group as per above. Further, the definition under Draft Rules are in line with Action 13 report of the OECD BEPS.
