Vinodh & Muthu. Tax Alert. Insight. Chartered Accountants. Country by Country Reporting & Master File

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1 Vinodh & Muthu Chartered Accountants Tax Alert Country by Country Reporting & Master File Insight The Organisation for Economic Cooperation and Development ( OECD ) report on Action 13 of Base Erosion and Profit Shifting ( BEPS ) plan provides for revised standards for transfer pricing documentation and a template for countryby-country reporting ( CbCR ) of income, earnings, taxes paid and certain measure of economic activity. India being an active member of OECD, in Finance Budget 2016, recommended a three tier structure report in line with BEPS report. A three-tiered structure has been mandated consisting of:- (iii) a country-by-country report containing certain information relating to the global allocation of the MNE's income and taxes paid together with certain indicators of the location of economic activity within the MNE group. Accordingly the provisions of the Incometax Act, 1962 ( the Act ) was amended vide Finance Act, 2016 and detailed rules were provided on 31st October VMCA, in this alert, brings you the applicability, compliance, key dates and penal consequences on non-compliance with respect to CbCR and Master File. (i) (ii) a master file containing standardised information relevant for all multinational enterprises (MNE) group members; a local file referring specifically to material transactions of the local taxpayer; and

2 Applicability Master File Consolidated group revenue for the accounting year 1 exceeds 500 Crores; and Aggregate value of international transaction: during the accounting year 1 exceeds 50 Crores; or in respect of purchase, sale, transfer, lease or use of intangible property during the accounting year 1 exceeds 10 Crores. Country by Country Report Consolidated group revenue for the accounting year exceeds 5,500 Crores. The rate of exchange for the calculation of the value in rupees of the consolidated group revenue in foreign currency shall be the telegraphic transfer buying rate of such currency on the last day of the accounting year. Key Dates Master File Form Requirement Due Date (FY ) 3CEAA Part A by every constituent entity 2 31st March CEAA Part B by constituent entity 2 for whom Master File is applicable Due Date (FY onwards) Return filing due date as per Sec. 139(1) (say 30th November) 3CEAB Designate a constituent entity 2 to file Master File where there are more than one constituent entity 30 days before the due date of filing Form 3CEAA (28th February 2018 for FY ) 1 Accounting year - (i) a previous year, in a case where the parent entity is resident in India; or (ii) an annual accounting period, with respect to which the parent entity of the international group prepares its financial statements under any law for the time being in force or the applicable accounting standards of the country or territory of which such entity is resident, in any other case. 2 Constituent Entity - (i) any separate entity of an international group that is included in the consolidated financial statement of the said group for financial reporting purposes, or may be so included for the said purpose, if the equity share of any entity of the international group were to be listed on a stock exchange; (ii) any such entity that is excluded from the consolidated financial statement of the international group solely on the basis of size or materiality; or (iii) any permanent establishment of any separate business entity of the international group included in clause (i) or clause (ii), if such business unit prepares a separate financial statement for such permanent establishment for financial reporting, regulatory, tax reporting or internal management control purposes. 2

3 Key Dates Country by Country Reporting Form Requirement Due Date Due Date 3CEAC Every constituent entity whose parent entity is not resident in India (FY ) (FY onwards) 2 months prior to furnishing Form 3CEAD (31st January 2018 for FY ) 3CEAD Parent entity or alternate reporting entity resident in India Constituent entity, if the parent entity of a country with which India does not have an agreement providing for exchange of the CbC reporting or where the information cannot be exchanged in spite of having an exchange agreement 31st March 2018 Return filing due date as per Sec. 139(1) (say 30th November) Click here to know the countries with which India has automatic exchange of CbC 3CEAE Designate a constituent entity to file CbC Report where there are more than one constituent entity Has not been prescribed. Might remain same as Form 3CEAB Penalty Non-compliance Penalty Non-filing of report Rs.5,000 per day till a month s default Rs.15,000 per day after a month Non-submission of information called for within the time Provides inaccurate information or fails to correct such inaccuracies within 15 days Rs.50,000 per day if default continues after service of penalty notice Rs.5,000 per day Rs.50,000 per day if default continues after service of penalty notice Rs.500,

4 Information and Documentation Master File Part A Name, address and PAN of the constituent entity Name and address of the international group Accounting year Details of constituent entities operating in India (Name, address and PAN) Part B List of all entities in the international group along with address Chart depicting international group structure Description of business of international group which includes - nature, important drivers, major geographical markets, TP policies, FAR analysis of constituent entities that contribute 10% of revenue or assets or profits of the group etc. Description of overall strategy of the international group List of all entities engaged in development and management of intangible property List of all important intangible property owned by the international group along with name and address of legal owners. List of agreements among international group along including cost contribution arrangement Detailed description of TP policies for research & development and intangibles and financing Detailed description on financing arrangements of the international group List of entities in international group that provides central financing including their place of effective management Detailed description on financing arrangements including names and addresses of top ten unrelated lenders Copy of annual consolidated financial statement Details of existing unilateral advance pricing arrangement and other tax rulings in respect of international group for allocation of income. Country by Country Report Part A - Jurisdiction wise allocation of income, taxes, stated capital, accumulated earnings, number of employees and tangible assets other than cash & cash equivalents Part B - List of all constituent entities per tax jurisdiction with main business activity Part C - Additional information that is considered necessary to substantiate information in Part A and Part B 1 Accounting year - (i) a previous year, in a case where the parent entity is resident in India; or (ii) an annual accounting period, with respect to which the parent entity of the international group prepares its financial statements under any law for the time being in force or the applicable accounting standards of the country or territory of which such entity is resident, in any other case. 4

5 Automatic exchange of CbC to India Country Argentina Australia Austria Belgium Bermuda Brazil Bulgaria Canada Cayman Islands Country Japan Jersey Korea Latvia Liechtenstein Lithuania Luxembourg Malaysia Malta Back Chile (for periods from 1st Jan 17) Colombia Croatia Cyprus (for periods from 1st Jan 16) Czech Republic Denmark Estonia Finland France Germany Greece Guernsey Hungary (for periods from 1st Jan 16) Iceland Indonesia (for periods from 1st Jan 16) Ireland Isle of Man Mauritius (for periods from 1st Jan 16) Mexico Netherlands New Zealand Norway Poland Portugal (for periods from 1st Jan 16) Russia (for periods from 1st Jan 16) Singapore Slovak Republic Slovenia South Africa Spain Sweden Switzerland United Kingdom Uruguay (for periods from 1st Jan 17) Italy 5

6 Vinodh & Muthu Branches Chennai New No. 23 I Floor, 92nd Street, 18th Avenue, Ashok Nagar, Chennai Madurai No. 634 I Floor, 14th East Cross Street, Anna Nagar, Madurai Contact Information C. Muthu Palaniappan Partner muthuc@vmca.co C. Vinodh Kumar Partner vinodhcc@vmca.co The information contained in this alert is to update on transfer pricing and cannot be exercised as a professional advice. We will not be liable in respect of any special, indirect or consequential loss or damage. 6