The Central Board of Direct Taxes (CBDT), after examining the comments and suggestions received from stakeholders and the general public, has notified the Rules for Maintaining and Furnishing of Transfer Pricing Documentation in the Master File and Country – By – Country (CBC) Report.
Background – In Brief
To keep India’s commitment in implementing OECD’s recommendations relating to “Transfer Pricing Documentation and Country-by-Country Reporting”, Section 286 has been inserted in the Income Tax Act 1961 vide Finance Act, 2016 to provide or to furnish Country-by-Country report in respect of an International Group (IG) by its constituent.
Further, Section 92D of the Act was also amended vide Finance Act, 2016 suitably to provide for keeping and maintaining of Master File by every constituent entity of an international group (IG), which was to be furnished in this regard.
Subsequent to the aforesaid amendments to the Income Tax Act, the Board has sought comments and suggestions on the proposal to insert rules 10DA, 10DB and form nos. 3CEBA to 3CEBE in the Income-tax Rules, 1962.
1. Rules: The Income-tax (Twenty-fourth Amendment) Rules, 2017
2. Threshold Limit
For CBC Report: The threshold for the Country-By-Country Report is total consolidated group revenue of Rs. 5,500 crore or more.
The threshold for the Master File: The threshold for Master File is consolidated group revenue exceeding Rs. 500 crore and either the aggregate value of international transactions as per the books of accounts exceeding Rs. 50 crore or aggregate value of international transactions in respect of intangible property exceeding Rs. 10 crores.
3. Designate Constitute Entity
An international group having multiple Indian constituent entities may designate one constituent entity to file the Master File.
Reporting of CBC Report in Form 3CEAD
Reporting Master File in Form 3CEAA
Part – A of Form 3CEAA is to be filled by every constituent entity of an international group regardless of whether it qualifies under the threshold for furnishing Master File.
To reduce the compliance burden, such international group having multiple Indian constituent entities can designate one constituent entity to file Part A on its behalf.
5. Form 3CEAD for furnishing Country-by-Country Report follows OECD template.
Due Date for Filing First CBC Report
For Financial Year 2016-17, due date has been extended till 31.03.2018 vide Circular No. 26/2017 dated 25.10.2017
Due Date for submitting first Master File
The date of compliance for furnishing the Master File for Financial Year 2016-17 has also been extended to 31.03.2018.
The Income-tax (Twenty-fourth Amendment) Rules, 2017 – In Brief
Information & documents to be kept and maintained under proviso to sub-section (1) of section 92D and to be furnished in terms of sub-section (4) of section 92D
|Requisite Information and Documents – (Rule DA)|
|Every person, being a constituent entity of an international group |
|1. If the consolidated group revenue of the international group, as reflected in the consolidated financial statement of the international group for the accounting year, exceeds Rs. 500 Crore & |
2. The aggregate value of international transactions :
• During the accounting year, exceeds Rs. 50 Crore, or
• In respect of the purchase, sale, transfer, lease or use of intangible property, exceeds Rs. 10 Crore.
Requisite Information And Documents of The International Group (IG)
1. A list of all entities of the IG along with their addresses
2. A chart depicting the legal status of the constituent entity and ownership structure of the entire IG
3. A description of the business of IG during the accounting year including –
• Nature of the business
• Important drivers of profits of such business
• A description of the supply chain for the 05 largest products or services of the IG in terms of revenue and any other products including services amounting to more than 5% of consolidated group revenue
• A list and brief description of important service arrangements made among members of the IG other than research and development services
• A description of the capabilities of the main service providers within the IG
• Details about the Transfer Pricing Policies (TP) for allocating service costs and determining prices to be paid for intra-group services
• A list and description of the major geographical markets for the products and services offered by the IG
• A description of the functions performed, assets employed and risks assumed by the constituent entities of the IG that contribute at least 10% of the revenues or assets or profits of such group; and
• a description of the important business restructuring transactions, acquisitions and divestments;
4. A brief description of the overall strategy of the IG for the development, ownership and exploitation of intangible property, including the location of principal research and development facilities and their management.
5. A list of all entities of the IG engaged in development and management of intangible property along with their addresses.
6. A list of all the important intangible property or groups of intangible property owned by the IG along with the names and addresses of the group entities that legally own such intangible property
7. A list and brief description of important agreements among members of the IG related to intangible property, including cost contribution arrangements, principal research service agreements and license agreements
8. A detailed description of the TP Policies of the IG related to research and development and intangible property
9. A brief description of important transfers of interest in intangible property, if any, among entities of the IG, including the name and address of the selling and buying entities and the compensation paid for such transfers
10. A detailed description of the financing arrangements of the IG including the names and addresses of the top ten unrelated lenders
11. A list of group entities that provide central financing functions, including their place of operation and of effective management
12. A detailed description of the TP Policies of the international group related to financing arrangements among group entities
13. A copy of the annual consolidated financial statement (CFS) of the IG and
14. A list and the brief description of the existing unilateral advance pricing agreements (APAs) and other tax rulings in respect of the IG for allocation of income among countries.
|Reporting & Furnishing of Form 3CEAA||And same shall be furnished to the Director General of Income-tax (Risk Assessment) on or before the due date for furnishing the return of income as specified in sub-section (1) of section 139 |
Further, the information in Form No. 3CEAA for the accounting year 2016-17 may be furnished at any time on or before the 31st day of March 2018.
|1. Part A of Form No. 3CEAA |
Shall be furnished by every person, being a constituent entity of an IG.
2. Part B of Form No. 3CEAA
Shall be furnished by a person, being a constituent entity of an IG, in those cases where the conditions as provided in sub-rule (1) are satisfied.
|Intimation In case of more than one constituent entity Resident In India,||The intimation shall be made by the designated constituent entity to the Director General of Income-tax (Risk Assessment), in Form 3CEAB at least 30 days before the due date of filing of the Form 3CEAA.|
|Mode of Submission of Forms||The Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems), shall specify the procedure for electronic filing of Form No. 3CEAA and Form No. 3CEAB.|
|Preservation of Information & other relevant Documents||Period of eight years (08) from the end of the relevant Assessment Year.|
|The rate of Exchange||The telegraphic transfer buying rate of such currency on the last day of the Accounting Year.|
|Furnishing of Report in respect of an International Group (IG) – (Rule DB)|
|Furnishing of Report in respect of an (IG) In Form 3CEAC |
|Every constituent entity resident in India, shall, if its parent entity is not resident in India, intimate the Director General of Income-tax (Risk Assessment), the following, namely:- |
1. whether it is the alternate reporting entity of the IG; or
2. The details of the parent entity or the alternate reporting entity, as the case may be, of the IG & the country or territory of which the said entities are residents.
|Intimation By Form 3CEAD |
|Shall be made at least two months (02) prior to the due date for furnishing of the report.|
|Frequency of Intimation||Every parent entity or the alternate reporting entity, resident in India, shall furnish the report for every reporting accounting year to the Director General of Income-tax (Risk Assessment)|
|Intimation In case of more than one constituent entity Resident In India||The report may be furnished by that entity which has been designated by the IG to furnish the said report and the same has been intimated to the Director General of Income-tax (Risk Assessment) in Form No. 3CEAE.|
|Total consolidated group revenue of the IG||Five Thousand Five Hundred Crore Rupees (Sub-section (7) of Section 286|
The Author is a budding Tax Law Professional and can be reached at email@example.com