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India and United States of America signed an inter- governmental agreement for exchange of country- by –country (CbC) reports on March 27, 2019. This enabled both the countries to exchange CbC reports filed by the ultimate parent organizations of multinationals in respect of jurisdictions, pertaining to the years commencing on or after January 1, 2016. Since there was no agreement between India and U.S before which resulted in a situation where CbC reports are required to be filed locally in India, even if the ultimate parent entities of the international group that were in U.S. had filed the CbC reports in U.S.

India and United States of America

Recently, the Government of the Republic of India and the Government of the United States of America concluded an agreement increasing international tax in relation to taxes paid, global allocation of income among tax jurisdictions in which multinationals operate through the automatic exchange of annual CbC reports with a view to assess high level transfer pricing risks and profit shifting related risks, as well as for economic and statistical analysis. The agreement included the following:

What India-US agreement for Country by Country reporting includes

1. Exchange of information with respect to MNE (Multinational enterprises) groups

The competent authority of each party shall exchange with the competent authority of the other party annually, on an automatic basis, the CbC report received from each reporting entity that is resident for tax purposes in its jurisdiction, provided that, on the basis of the information provided in the CbC Report, one or more constituent entities of the MNE group of the reporting entity are resident for tax purposes in the jurisdiction of the other competent authority, or are subject to tax with respect to the business carried out through a permanent incorporation situated in the jurisdiction of the other competent authority.

2. Confidentiality and limitation of use

Information shall be subject to the confidentiality and other protections provided for in the convention, including the provisions limiting the use of the information exchanged. In the event of termination of this agreement, all information previously exchanged under this agreement shall remain subject to such terms of the convention.

3. Consultations and amendments

If any difficulties in the implementation of this agreement arise, either party may request consultations to develop appropriate measures to ensure the fulfillment of this agreement.

4. Terms of the agreement

This agreement shall enter into force on the date on which the second of the two parties has provided a written notification to the government of the other jurisdiction that the necessary internal procedures for entry into force of this agreement have been completed. However, exchange of information under this agreement shall not commence until the arrangement is operative by its terms.

5. Termination

This agreement shall terminate on the earlier of the date of termination of the convention or the first day of the month following the expiration of a period of 12 months after the date upon which either party provides notice of termination in writing to the other party.

With India expressing its commitment to the appropriate use, the guidance should now facilitate the exchange of CbCs reports with India through the competent authority agreements. Since the implementation of the CbC reporting regulations in India, there has been ongoing and increasing activity around CbC reporting. It would also obviate the need for Indian subsidiary companies of US MNEs to do local filing of the CbC reports, thereby reducing the compliance burden.

Author Bio

Ankit is a Bachelors in commerce from Delhi University and a fellow member of Institute of Chartered Accountants of India, New Delhi. He is also certified in IFRS and Forensic Accounting and Fraud Detection. He lately qualified with ICAEW as well and is the co-founder of the firm. Prior to being as View Full Profile

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June 2024