The Central Board of Direct Taxes has released the awaited draft rules in relation to CBC reporting, Master File and related notifications required to be filed in India. These are draft rules and the CBDT has invited public comments and suggestions. Finance Act, 2016 had introduced the Country by Country (‘CbC’) report and master file reporting requirements effective from 1 April 2017 (i.e., applicable for FY 2016-17).
The rules are attached herewith for your reference and key highlights are provided below. A detailed analysis is provided in the attached document.
I. Master File
- A constituent entity of an MNE group meeting the following quantitative threshold will be required to file the Master File in Form 3CEBA with the Director General of Income-tax (Risk Assessment):
- The consolidated revenue of the MNE Group exceeds INR 5000 million (approximately USD 75 million/ Euro 65 million) in the accounting year preceding the previous year; and
- The aggregate value of international transactions exceeds INR 500 million (approximately USD 7.5 million / Euro 6.5 million) or international transactions relating to intangible property exceeds INR 100 million [USD 1.5 million / 1.33 million] in the reporting accounting year
- The Master File information required to be submitted in India is largely in line with the guidance provided under BEPS Action 13, but includes additional information disclosure, such as list of constituent entities engaged in development and management of intangibles along with their addresses.
- The Master File has to be furnished by the due date of filing the income-tax return (i.e., 30 November, when Form 3CEB is filed). However, for the Financial Year ended 31 March 2017, the due date is extended to 31 March 2018
- In case of more than one Indian constituent entity, the Master File may be furnished by a constituent entity designated by the MNE group. A notification to this effect need to be submitted in Form 3CEBE to the Director General of Income Tax (Risk Assessment) at least 30 days before the due date for filing the Master File.
- The Master File has to be kept and maintained for the period of eight years from the end of the relevant assessment year
II. CbC report
- A constituent entity of an MNE group in India, which is neither a parent entity nor an alternate reporting entity in India, need to file the CbC report within the above time limit, if, the parent entity of such constituent entity is resident in a country;
- The due date for filing the CbC report in India continues to be the due date for filing the income-tax return (i.e. 30 November, when Form 3CEB is filed), unless a specific clarification extending the due date is released for FY 2016-17
- The CbC report needs to be submitted in Form No 3CEBC with the Director General of Income-tax (Risk Assessment) and the disclosure requirements are in line with the requirements under BEPS Action 13
- The draft rules provide the consolidated MNE group revenue threshold of INR 55,000 million (approximately USD 825 million/ Euro 715 million) in the accounting year preceding the reporting accounting year, for applicability of the rules
- With which India does not have an agreement for exchange of the CbC report; or
- There has been a systematic failure and such failure is intimated to the Indian constituent entity
- In case of more than one Indian constituent entity, the CbC report may be furnished by an entity designated by the MNE group. A notification to this effect need to be submitted in Form 3CEBD to the Director General of Income Tax (Risk Assessment) – It appears that the draft rules do not prescribe any timeline for such notification
III. CbC notification
- An Indian constituent entity of a MNE group headquartered overseas is required to file a notification in India with the Director General of Income-tax (Risk Assessment), reporting the details of the parent or alternate reporting entity
- The notification is required to be submitted in Form No 3CEBB on or before sixty days prior to the due date of the filing the income-tax return of the Indian Constituent Entity. (Interestingly for FY 2016-17, the due date for furnishing the notification is elapsed (being 30 September 2017 for filing in 30 November, 2017). Further clarification in this respect is needed from the CBDT)