In line with the BEPS Action Plan 13, the Finance Act 2016 has introduced new provisions i.e. section 92D(4) read with section 286 in relation to master file and CbCR requirements applicable from FY 2016-17. The rules with respect to the same have been notified by the CBDT on 31 October 2017.
Master file requirements
As per Section 92D(1), the person, being a constituent entity of an international group , shall also keep and maintain such information and document in respect of an international group as may be prescribed. Further as per Section 92D(4) of the Act read with Rule 10DA(2) of the Rules, the said information is to be furnished to the Director General of Income-tax (Risk Assessment).
In relation to the above, every person, being a constituent entity of an international group shall file such details in part A to Form 3CEAA. Further, such person shall also be required to file additional details as required under part B of Form No. 3CEAA if it satisfies the following criteria:
- Consolidated group revenue of the international group, as reflected in the consolidated financial statement of the international group for the accounting year preceding such previous year, exceeds INR 5 billion; and
- The aggregate value of international transactions:
- during the accounting year, as per the books of accounts, exceeds INR 500 million, or
- in respect of purchase, sale, transfer, lease or use of intangible property during the accounting year, as per the books of accounts, exceeds INR 100 million.
We have summarised below the compliance requirements which are to be adhered by constituent entity (ies) towards furnishing of master file requirements with the prescribed authority:
Any entity of international group
- that is included in consolidated financial statement of the group for financial reporting purposes or may be so included if the equity share of any entity of the international group were to be listed on a stock exchange
- that is excluded from consolidated financial statement solely on the basis of size or materiality
- that is a PE of any separate business entity of the international group and such PE prepares separate financial statement for financial reporting, regulatory, tax reporting or internal management control purposes
Group includes a parent entity and all the entities in respect of which, for the reason of ownership or control, a consolidated financial statement for financial reporting purposes:
- is required to be prepared under any law/accounting standard of the country/territory of which the parent entity is resident; or
- would have been required to be prepared if the equity shares of any of the enterprises were listed on a stock exchange in the country/territory in which the parent entity is resident
Parent entity is a constituent entity of the international group holding directly or indirectly an interest in one or more of the other constituent entities of the group such that it is required to prepare a consolidated financial statement:
- under any law/accounting standard of the country/territory of which the entity is resident; or
- would have been required to prepare the same if the equity shares of any of the enterprises were listed on a stock exchange,
and there is no other constituent entity of such group that is required to prepare a consolidated financial statement in the circumstances as mentioned above. Any group that includes:
- two or more enterprises which are resident of different countries / territories or
- an enterprise, being resident of one country/territory carrying on business through a permanent establishment (“PE”) in other countries/territories
|Form To be filed
|3CEAA – Part A
||Furnishing of basic details pertaining to the international group – To be filed by every constituent entities of the international group. (In the case of more than one constituent entity resident in India – by the entity designated by the international group for this purpose)
||Due date of filing return of income under section 139(1)
|3CEAA –Part B
||Furnishing of further detailed information as specified - To be filed by those constituent entities of the international group that satisfy the additional criteria as detailed above. (In the case of more than one constituent entity resident in India – by the entity designated by the international group for this purpose)
||Notification in case there are more than one constituent entities of international group resident in India – To be filed by the entity designated by the international group to furnish the report in Form 3CEAA
||At least 30 days before the due dates as mentioned above for furnishing of Form No. 3CEAA
The CbCR filing and exchange mechanism is summarised as under:
|Notification report filing (in Form 3CEAC) by every constituent entity resident in India.
[Section 286(1), Rule 10DB(1)]
|Constituent entity resident in India
||Atleast 2 months prior to the due date for filing the CbCR under section 286(2)
|Filing CbCR in India for every reporting accounting year [Section 286(2), Rule 10DB(3)]
||Indian resident which is the parent entity of group (‘Indian parent’)
Alternate reporting entity , which is resident in India (“Indian ARE”)
|12 months from the end of relevant accounting year
A constituent entity that has been designated, in place of parent entity, to furnish CbCR, in the country or territory in which such constituent entity is resident on behalf of the group.
|Filing of CbCR in India in special cases
[Section 286(4), Rule 10DB(4)]
- Constituent entity resident in India, not being Indian parent or Indian ARE and
- India does not have agreement for exchange of the report (“ERA”) referred to in section 286(2) with country/territory of parent entity of group; or
- Systemic failure of country or territory and constituent entity is notified of failure by Indian tax authorities
- If there are more than one constituent entities in India, then the entity designated by the international group for this purpose shall file a intimation with the prescribed authority,
- in the form 3CEAE.
|Due date has not been prescribed yet
|Exchange of CbCR through ERA between Parent country and India
||Parent entity files CbCR in the country of its tax residence
||CbCR to be automatically exchanged through ERA entered into between India and parent entity’s country
|Exchange of CbCR through ERA entered into between ARE country and India [section 286(5)]
||ARE files CbCR in the country of its tax residence
- Report is required to be filed in ARE country and India has ERA with ARE country
- No systemic failure of exchange of report
- Indian tax authorities are notified about ARE by Indian constituent entity vide Form 3CEAC.
Systemic failure with respect to a country/territory means that the country/territory has an ERA with India, but—
- in violation of the said agreement, it has suspended automatic exchange; or
- has persistently failed to automatically provide to India the report in its possession in respect of any international group having a constituent entity resident in India.