Union Budget 2018- Rationalisation of provisions relating to Country-by-Country Report

Section 286 of the Act contains provisions relating to specific reporting regime in the form of Country-by-Country Report (CbCR) in respect of an international group. Based on model legislation of Action Plan 13 of Base Erosion and Profit Shifting (BEPS) of the Organisation for Economic Co-operation and Development (OECD) and others, following amendments are proposed to be made so as to improve the effectiveness and reduce the compliance burden of such reporting:—

(i) the time allowed for furnishing the Country-by-Country Report (CbCR), in the case of parent entity or Alternative Reporting Entity (ARE), resident in India, is proposed to be extended to twelve months from the end of reporting accounting year;

(ii) constituent entity resident in India, having a non-resident parent, shall also furnish CbCR in case its parent entity outside India has no obligation to file the report of the nature referred to in sub-section (2) in the latter’s country or territory;

(iii) the time allowed for furnishing the CbCR, in the case of constituent entity resident in India, having a non-resident parent, shall be twelve months from the end of reporting accounting year;

(iv) the due date for furnishing of CbCR by the the ARE of an international group, the parent entity of which is outside India, with the tax authority of the country or territory of which it is resident, will be the due date specified by that country or territory;

(v) Agreement would mean an agreement referred to in sub-section (1) of section 90 or sub-section (1) of section 90A, and also an agreement for exchange of the report referred to in sub-section (2) and sub-section (4) as may be notified by the Central Government;

(vi) “reporting accounting year” has been defined to mean the accounting year in respect of which the financial and operational results are required to be reflected in the report referred to in sub-section (2) and sub-section (4).

These amendments are clarificatory in nature.

These amendments will take effect retrospectively from the 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent years.

Extract of Clause 53 of Finance Bill 2018

Clause 53 of the Bill seeks to amend section 286 of the Income-tax Act relating to furnishing of report in respect of international group.

The said section, inter alia, provides for specific reporting regime containing revised standards for transfer pricing documentation and a template for country-by-country reporting.

Sub-section (2) of the said section provides that the parent entity or the alternate reporting entity of an international group which is resident in India shall furnish a report in respect of the international group on or before the due date specified under sub-section (1) of section 139 for furnishing of return of income of the relevant accounting year.

It is proposed to amend the said sub-section so as to provide that the said report for every reporting accounting year shall be furnished within a period of twelve months from the end of said reporting accounting year.

It is further proposed to amend sub-section (3) to give reference therein of the report to be furnished under sub-section (4).

It is also proposed to amend sub-section (4) so as to provide in cae of a constituent entity, resident in India, whose parent entity is outside India that,—

(a) report of the nature referred to in sub-section (2) shall be furnished within the period specified in sub-section (2); and

(b) an additional condition for filing of report by said entity in a case where a country or territory, of which the parent entity is resident, is not obligated to file the report of the nature referred to in sub-section (2).

It is also proposed to amend sub-section (5) so as to provide that the due date for furnishing of the report of the nature referred to in sub-section (2) by said entity with the tax authority of the country or territory of which such entity is resident, would be the due date specified by that country or territory.

It is also proposed to consequentially substitute clause (b) of sub-section (9) so as to provide that the term “agreement” would mean a combination of,—

(i) an agreement referred to in sub-section (1) of section 90 or sub-section (1) of section 90A; and

(ii) an agreement as may be notified by the Central Government for exchange of the report referred to in sub-section (2) and sub­section (4).

It is also proposed to consequentially amend clause (j) of sub-section (9) so as to also make reference to the report referred to in sub-section (4).

These amendments are clarificatory in nature.

These amendments will take effect retrospectively from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-2018 and subsequent years.

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