• Gearing up for CbCR Compliance – A recap of Indian CbCR/Master File Norms
  • The Finance Act 2016 introduced provisions relating to Country by Country Report (CbCR) and Master File pursuant to adoption of OECD’s BEPS Action Plan-13 in India.

    While the law was enacted and it was made applicable with effect from 1st April 2017 (i.e. from AY 2017-18 onwards), the notification regarding the Final Rules was released on 31st October 2017 providing much awaited guidelines with respect to maintenance and furnishing of Master File and CbCR.

    As per Final Rules and Regulations, the due date for furnishing Master File and CbCR is 30th November following the relevant fiscal year. But as the final rules were released on 31st October 2017, the Government extended the due dates for furnishing such documents to 31st March 2018 for FY 2016-17 only.

    Recently, the Government introduced various amendments via Finance Act, 2018 and accordingly CbCR report has to be furnished within 12 months i.e. 31st March instead of 8 months i.e. 30th November (as specified earlier) following the end of reporting accounting year. It is important to note that the due date to furnish Master File is still 30th November following the end of reporting accounting year.

    Summarized below are salient features of the Final Rules.

  • Master File and Related Compliances
    • A constituent entity of an MNE group meeting the following quantitative threshold will be required to file Master File in ‘Form 3CEAA’ with the Director General of Income-tax (Risk Assessment):
    • The consolidated revenue of the MNE Group exceeds INR 500 crores (approximately USD 75 million/ Euro 65 million) in the accounting year; and
    • The aggregate value of international transactions exceeds INR 50 crores (approximately USD 7.5 million / Euro 6.5 million) or international transactions relating to intangible property exceed INR 10 crores (USD 1.5 million / Euro 1.33 million) in the reporting accounting year.
    • It may be noted that Form 3CEAA has been divided into two parts; Part-A and Part-B. Part-A consists of limited information relating to details of taxpayer, international group to which it belongs to, number of group entities in India and their permanent account number, addresses, etc. Part-B requires exhaustive and descriptive information on more than twenty items listed as part of Master File.
  • http://www.incometaxindia.gov.in/communications/notification/notification92_2017.pdf
    http://egazette.nic.in/writereaddata/2018/184302.pdf
    • The Master File has to be furnished by the due date of filing the income-tax return (i.e., 30th November, when Form 3CEB is filed).
    • In case of more than one Indian constituent entity, the Master File may be furnished by a constituent entity designated by the MNE group. An intimation to this effect need to be submitted in Form 3CEAB 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 a period of eight years from the end of the relevant assessment year.
  • CbCR and Related Compliances
  • The Final Rules provide the consolidated MNE group revenue threshold of INR 5,500 crores (approximately USD 825 million/ Euro 715 million) in the accounting year preceding the reporting accounting year, for applicability of the CbCR rules.

    CbCR needs to be submitted in Form No 3CEAD with the Director General of Income-tax (Risk Assessment) and the disclosure requirements are in line with the requirements under BEPS Action 13.

    As per the Transfer Pricing provisions, CbCR shall be furnished within a period of twelve months from the end of the said reporting accounting year, i.e. for FY 2017-18 CbCR should be filed by 31st March 2019.

    An Indian constituent entity of a MNE group headquartered overseas is required to file an intimation in India with the Director General of Income-tax (Risk Assessment), reporting the details of the parent or alternate reporting entity.

    The intimation in Form No 3CEAC shall be made at least two months prior to the due date of the filing the CbCR, i.e. for FY 2017-18 the due date for the intimation will be 31st January 2019.

    A constituent entity of an MNE group in India, which is neither a parent entity nor an alternate reporting entity in India is required to file CbCR, if, the parent entity (‘PE’) of such constituent entity is resident in a country;

    • Where the parent entity is not obligated to file the CbCR.
    • With which India does not have an agreement for exchange of the CbCR; or
    • There has been a systematic failure and such failure is intimated to the Indian constituent entity.
  • It is important to note that the due date for filing CbCR by entities as per above conditions will be prescribed by the Government and accordingly such entities are not required to furnish CbCR by 31st March following the relevant accounting year (specified under normal circumstances).
  • For example, as India doesn’t have a MCAA with USA, therefore Indian CEs of US Headquartered MNEs will not be required to file CbCR by 31st March following the relevant accounting year rather the due date for such compliance by Indian CEs shall be prescribed by the Government.
  • In case of more than one Indian constituent entity and if, the parent entity (‘PE’) of such constituent entities is resident in a country;
    • Where the parent entity is not obligated to file the CbCR.
    • With which India does not have an agreement for exchange of the CbCR; or
    • There has been a systematic failure and such failure is intimated to the Indian constituent entity.
  • Then the CbCR may be furnished by an entity designated by the MNE group. An intimation to this effect needs to be submitted in Form 3CEAE to the Director General of Income-tax (Risk Assessment) – It appears that the Final Rules do not prescribe any timeline for such intimation.
  • Summary of Final Forms and Rules for Master-File
    • Section 92D (Master File Forms) Purpose Conditions for Applicability Who is to file? Timeline Filed to whom? Statutory Source
      Form 3CEAA Part A: – Limited information to be furnished. Every constituent entity/designated constituent entity of an international group has to file Part A irrespective of the turnover. The CE in India. Within 8 months following the end of reporting accounting year.
      For FY 2017-18 :- 30th November 2018
      DGIT (Risk Assessment) Proviso to S.92D(1) :- For keeping and maintenance of report
      S.92D(4) :- Furnishing of report
      Rule 10DA :- Contents
      Part B: – Detailed information to be furnished. (Broadly same as OECD Master File)
      1. Consolidated revenue > 500 cr; and
      2. aggregate international transactions> 50 cr or; intangible related transactions > 10 cr.
      Form 3CEAB To notify the CE designated for furnishing Master File When there is more than one CE in India. The CE designated for furnishing Master File. Thirty days before the due date of filing Form 3CEAA.
      For FY 2017-18 :- 31st October, 2018
      DGIT (Risk Assessment) S.92D(4)
      Read with
      Rule 10DA
  • Summary of Final Forms and Rules for CbCR
    • Section 286 (CBCR Forms) Purpose When to File? Who is to file? Timeline Filed to whom? Statutory Source
      Form 3CEAC To intimate ARE or PE (Whether itself or some other)
      Note: – Only if PE is not resident in India.
      If international consolidated revenue > 5500 crores (If CE is resident in India) Every CE resident in India. Two months prior to the due date for furnishing Form 3CEAD.
      For FY 2017-18 :- 31stJanuary 2019
      DGIT (Risk Assessment) S.286(1)
      Read with
      Rule 10DB
      Form 3CEAD CBCR Reporting If international consolidated revenue > 5500 crores
      • By PE/ARE, if PE/ARE are in India
      • If only CE in India, CE to file Form 3CEAC to intimate information on PE/ARE- and GOI shall obtain information through exchange of information
      • If multiple CEs in India, the designated CE(as per Form 3CEAE) to file CbCR
      Within 12 months following the end of reporting accounting year.
      For FY 2017-18 :- 31st March 2019
      DGIT (Risk Assessment) S.286(2) :-Furnishing of report
      S.286(3) :- Contents
      Read with
      Rule 10DB
      Form 3CEAE To notify the CE designated for furnishing CbCR, only if there is more than one CE in India (and conditions given in note 1 below are fulfilled) If international consolidated revenue > 5500 crores The designated CE. No timeline is prescribed as per the Final Rules. DGIT (Risk Assessment) Proviso to S.286(4) Read with Rule 10DB
  • Note 1: If there are multiple CE’s in India and if, the parent entity (‘PE’) of such constituent entities is resident in a country:
    • Where the parent entity is not obligated to file the CbCR
    • With which India does not have an agreement for exchange of the CbCR; or
    • There has been a systematic failure and such failure is intimated to the Indian constituent entity.
    then one of them will be designated to undertake compliances under S.286.
  • Consolidated Turnover-Wise Compliance Obligations
    • Consolidated Turnover (CT) Compliance Obligations
      Upto 500 Crores Every CE/Designated CE of the international group to file Part A of Form 3CEAA
      >500 crores but < 5500 crores
      International transaction < 50 crore and;
      Intangible related transactions < 10 crores
      > 500 crores but < 5500 crores; and
      International transaction > 50 crore; or
      Intangible related transactions > 10 crores
      Part A and Part B of Form 3CEAA
      > 5500 crores CBCR requirements apply
      >5500 crores; and
      International transaction > 50 crores; or
      Intangible related transactions > 10 crores
      Maintain and furnish Master File. Also, CBCR requirements apply.
    In line with the above regulations, the taxpayers are advised to undertake necessary compliances/reporting action and prevent any penal consequences.
  • The information contained in this newsletter is solely intended to provide general guidance on matters of interest. Nothing herein constitutes professional or legal advice, nor does any information herein constitute a comprehensive or complete statement of the issues discussed. It is recommended that you seek a professional advice to confirm your understanding on the issues dealt above.