- Local File Reporting (Rule 10D)
This needs to be documented with the company itself
It is entity-specific information with reference to the related party transactions of the local taxpayer entity of the MNE (this is mainly the normal TP Study report as per Rule 10D of the Rules); refer Annex I of Chapter V of the Transfer Pricing Guidelines issued by OECD.
Report from an Accountant
Section 92E provides as follows:
“Every person who has entered into an international transaction during a previous year shall obtain a report from an accountant and furnish such report on or before the specified date in the prescribed form duly signed and verified in the prescribed manner by such accountant and setting forth such particulars as may be prescribed.”
Paraphrasing,
o Every ‘person’ who has entered into an international transaction is required to obtain a report from an ‘accountant’.
o The form of the report as well as the manner in which it is signed and verified would be prescribed by the Central Board of Direct Taxes.
o This report would have to be obtained and furnished on or before the ‘specified date’
Accountant ‘Accountant’ has been defined in section 92F(i) as follows;
“accountant” shall have the same meaning as in the Explanation below sub-section (2) of section 288;
An “accountant”, as per the explanation below section 288(2), would be -
o a chartered accountant within the meaning of the Chartered Accountants Act, 1949
o a person who by virtue of the provisions of section 226(2) of the Companies Act, 1956 is entitled to be appointed to act as an auditor of companies.
Specified date ‘Specified date’ as defined in section 92F(iv), means the following dates:
Person | Specified Date |
Company | 31st October of the relevant Assessment year |
Any other Assessee | 31st July of the Relevant Assessment year |
- Master File Reporting (Rule 10DA)
It needs to be filed with IT Department
It contains comprehensive information relevant for all MNE group members (it is an overview of the MNE group’s business, including the nature of its global business operations, its overall TP policies, and its global allocation of income and economic activity) refer Annex II of Chapter V of the Transfer Pricing Guidelines issued by OECD.
Person | Form No | Threshold Limits | Due Date |
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 of Form No.3CEAA | No limit | By due date of furnishing ROI, except for FY 2016-17, for which the deadline is on or before March 31, 2018 |
A Constituent entity passing the prescribed thresholds | Part B of Form No.3CEAA | If consolidated group revenue of international group > INR 500 Crores for the accounting year and if international transaction during the accounting year > INR 50 Crores as per books; [OR] If consolidated group revenue of international group > INR 500 Crores for the accounting year and if international transaction in respect of intangible property during accounting year > INR 10 Crores | By due date of furnishing ROI, except for FY 2016-17, for which the deadline is on or before March 31, 2018. |
The designated entity, where there are multiple CEs resident in India | Form No.3CEAA (Part A and Part B) | By Due date of furnishing of ROI, except for FY 2016-17, for which the deadline is on or before March 31, 2018 | |
Form No.3CEAB | At least 30 days before the due date of filing Form No.3CEAA, except for FY 2016-17, for which the deadline is on or before March 1, 2018 |
- Country by Country Reporting (Rule 10DB) [CbCR]
It needs to be filed with IT Department.
It consists of certain information relating to the global allocation of the MNE’s income and taxes paid together with certain indicators of economic activity like revenue, taxes paid, capital employed, head count etc. of each entity within the MNE group. Following is the format of such reporting as per OECD User Guide known as “Template for the Country-by-Country Report”.
CbCR Documentation to be complied by the international group having total consolidated group revenue > INR 5,500 crores* for accounting year ending on or before March 31, 2016 (for AY 2017-18) [similar ratio applicable to subsequent AY]
Category | Requirements | Due Date |
Parent entity or alternate reporting entity, resident in India (Sec 286 (2)) | File CbCR in Form No.3CEAD (for every reporting accounting year). The information included in the form are similar to those recommended in Action Plan 13. | For FY 2016-17: 31st March, 2018 For subsequent years: Due date of filling tax return |
Constituent entity resident in India, of Parent Entity not resident in India (Sec 286(1)) | File CbCR notification Form 3CEAC to the Director General of Income-tax (Risk Assessment) Vide this form the CE intimates · Whether it is alternate reporting entity of the group; or · The details of parent entity or the alternate reporting entity and the country / territory of which said entity is a resident. | At least two months prior to the date of furnishing of CbCR in Form 3CEAD. |
Constituent entity resident in India, of Parent Entity not resident in India – Specified cases, i.e, no agreement for exchange of CbCR or systematic failure (Sec 286(4)) | File CbCR in Form 3CEAD (for every reporting accounting year) In case there are more than one CEs resident in India, the international group may opt to designate a CE, wherein the Form 3CEAD has to be filed only by the designated CE. The intimation of the same needs to be filed by the designated CE in Form 3CEAE with Director General of Income-tax (Risk Assessment) | For filing of CbCR in Form 3CEAD: 1. For FY 2016-17: 31st March, 2018 For subsequent years: Due date of filling tax return For filing of intimation of designated CE in Form 3CEAE- no due date has been prescribed. |
Terms used in CbCR Reporting
- Accounting Year
“accounting year” means-
(i) a previous year, in a case where the parent entity or alternate reporting 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;
- Constituent Entity
“constituent entity” means-
(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;
- Alternate Reporting Entity
“alternate reporting entity” means any constituent entity of the international group that has been designated by such group, in the place of the parent entity, to furnish the report of the nature referred to in sub-section (2) in the country or territory in which the said constituent entity is resident on behalf of such group;
- International Group
“international group” means any group that includes, -
(i) two or more enterprises which are resident of different countries or territories; or
(ii) an enterprise, being a resident of one country or territory, which carries on any business through a permanent establishment in other countries or territories;
Penal Consequences for non-filing of CbCR
- Failure to furnish report or for furnishing inaccurate report u/s 286 (Sec 271GB)
Nature of Offence covered | If any reporting entity fails to furnish report [as referred to in Section 286(2)] in respect of international group. |
Quantum of Penalty | a) Rs 5,000 for every day for which failure continues, if the period of failure does not exceed one month; or b) Rs 15,000 for every day for which the failure continues beyond the period of one month. |
Any way out from the penalty | Section 273B - No penalty under section 271BA would be levied if the assessee proves that there was reasonable cause for the failure. |
Who is empowered to levy penalty? | Income tax Authorities prescribed u/s 286 |
- Penalty for furnishing of inaccurate particulars u/s 286(2):
Where a reporting entity provides inaccurate information in the report [as referred to in Section 286(2)], then it is liable to pay penalty of Rs 5,00,000, subject to satisfaction of conditions.
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