Transfer Pricing- Indian Rules On Master File And Country-By-Country-Reporting Requirements

The Indian Central Board of Direct Taxes (CBDT) has notified the final rules (the rules) for maintaining and furnishing of Transfer Pricing (TP) documentation in the Master File (MF) and Country-by-Country Report (CbCR). Following an inclusive approach when introducing a new and important regulation, the CBDT had, in line with global best practices, sought public comments on the draft rules. It is apparent from a reading of the rules that the CBDT has incorporated some of the recommendations/ comments which were put forth by us.

Master File

Following entities are required to file the Master File in India (Form No. 3CEAA)

  • Part A of Master File – Part A comprises of basic information relating to the International Group (“IG”) and the constituent entities of the IG operating in India (such as name, permanent account number and address). The final rules have clarified that Part A of the Master File will be required to be filed by every constituent entity of an IG, without applicability of any threshold;
  • Part B of Master File – Part B comprises of the main Master File information that provides a high level overview of the IG’s global business operations and transfer pricing policies. Every constituent entity of an IG that meets the following threshold will be required to file Part B of Master File: ‒

1. the consolidated group revenue for the accounting year exceeds INR 5,000 million (the draft rules had provided that this threshold is to be determined considering the group revenue for the preceding accounting year); and

2. for the accounting year, the aggregate value of international transactions exceeds INR 500 million, or aggregate value of intangible property related international transactions exceeds INR 100 million.

The Master File has to be furnished by the due date of filing the income-tax return i.e. 30 November following the financial year. However, for financial year 2016-17 (“FY 2016-17”), the due date is extended to 31 March 2018.

IGs with multiple constituent entities in India can designate one Indian constituent entity to file the Master File in India, provided an intimation to this effect is made in Form No. 3CEAB, 30 days prior to the due date for filing the Master File in India.

CBC Report

  • The threshold for applicability of CbC reporting has been specified as consolidated group revenue of INR 55,000 million in the preceding year.
  • The format of the CbC report (Form No. 3CEAD) is aligned with the BEPS Action 13 template.
  • The due date for filing the CbC report in India continues to be the due date for filing the income-tax return i.e. 30 November following the financial year. However, for FY 2016-17, the due date is extended to 31 March 2018 (as per the CBDT Circular 26/2017 released on 25 October 2017).

CBC Report Notification

  • Every Indian constituent entity of an IG headquartered outside India (“foreign IG”) is required to file the CbC report notification in the prescribed format (Form No. 3CEAC).
  • The “reportable accounting year” has to be specified in the Form No. 3CEAC. This requirement was not earlier specified in the draft rules.
  • The CbC report notification is required to be filed atleast two months prior to the due date for filing the CbC report, that is aligned to the due date for filing the income-tax return of the Indian constituent entity. As mentioned above, the due date for filing the CbC report for FY 2016-17 has been extended to 31 March 2018 and accordingly, the due date for the first CbC report notification for FY 2016-17 has also been extended to 31 January 2018.
  • Currently no option has been provided for filing a consolidated CbC report notification for multiple Indian constituent entities of a foreign IG.

Summary of Master File Related Forms

Who What When To Whom
A constituent entity

(irrespective of:

-whether the entity has entered into an international transaction

-threshold applicability

-whether the entity is resident or not)

Part A Form No. 3CEAA By due date of furnishing ROI, except for financial year (FY) 2016-17 which is on or before 31 March 2018 Director-General of Income tax, Risk Assessment (DGIT, RA)
A constituent entity, having:

a. Consolidated Group revenue of more than INR 5 billion for the accounting year; and

b.Aggregate value of international transaction during the accounting year-

-Exceeds INR 500 million; or

-Exceeds INR 100 million in respect of purchase, sale, transfer, lease or use of intangible property

Part B of Form No. 3CEAA By due date of furnishing ROI, except for financial year (FY) 2016-17 which is on or before 31 March 2018 DGIT, RA
The designated entity, where there are multiple CEs resident in India – Form No. 3CEAA (Part A and Part B)

-Form No. 3CEAB

– Form No. 3CEAA (Part A and Part B)-By due date of furnishing ROI, except for financial year (FY) 2016-17 which is on or before 31 March 2018

-Form No. 3CEAB-atleast 30 days before the due date of filing Form No. 3CEAA except for financial year (FY) 2016-17 which is on or before 1 March 2018

DGIT, RA

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