Specific Reporting Requirements - Country by Country Reporting - Section 286 - International Taxation - Income Tax

Specific Reporting Requirements - Country by Country Reporting - Section 286 Country-by-Country (CBC) report: The CBC report has to be submitted by parent entity of an International Group to the prescribed authority in its country of residence. This report is to be based on consolidated financial statement of the group. MNEs have to report annually for each tax jurisdiction in which they do business: The amount or revenue; Profit before income tax; and Income tax paid and accrued. MNEs have to report their total employment, capital, accumulated earnings and tangible assets in each tax jurisdiction. MNEs have to identify each entity within group doing business in a particular tax jurisdiction and provide an indication of the business activities each entity engages in. Maintenance Furnishing of Master File Persons required to keep and maintain the information and documents [ Rule 10DA ]: Every person, being a constituent entity of an international group shall If the consolidated group revenue of the international group, of which such person is constituent entity, as reflected in the consolidated financial statements of the international group for the accounting year, exceeds 500 crore; and The aggregate value of an international transactions- During accounting year, as per the books of accounts, exceeds 50 crore, or In respect of purchase, sale, transfer, lease, or use of intangible property during the accounting period, as per the books of accounts, exceeds 10 crore. The information and document shall be furnished to the JDIT designated by DGIT/PDGIT (system) in Form 3CEAA on or before the due date for furnishing the return of income. The constituent entity shall mandatorily furnish Part A of form 3CEAA whether or not the limits specified above are satisfied. Where there are more than one constituent entities of an International Group resident in India. Form 3CEAA may be furnished by any one constituent entity if The international group has designated such entity for this purpose and The information has been conveyed in Form 3CEAB to the JDIT in this behalf atleast 30 days prior to the due date of furnishing Form 3CEAA . Documents should be Kept Maintain for 8 Years from the end of the Assessment Year. Master file contains list of all entities of the International Group along with their addresses, legal status of the constituent entity and ownership structure of the entire international group, description of the business of International Group, List and brief description of important service arrangements etc. Furnishing of report in respect of International Group Section 286 Threshold limit for applicability of CbC reporting: If parent entity of the international group/ alternate reporting entity is resident in India shall be required to furnish CbC report, if the total consolidated group revenue as reflected in the consolidated financial statement (CFS) for the accounting year preceding such accounting year is above a threshold to be prescribed i.e., 6,400 crore Time Limit for furnish CbC report: Parent entity of international group or the alternate reporting entity, if it is resident in India shall be required to furnish the report in respect of the group in Form 3CEAD to JDIT designated by DGIT/PDGIT within 12 months from the end of the relevant accounting year. Details to furnish by resident constituent entity: it should contain the aggregate information in respect of- the amount of revenue, profit or loss before income-tax, amount of income-tax paid, amount of income-tax accrued, stated capital, accumulated earnings, number of employees and tangible assets not being cash or cash equivalents, with regard to each country or territory in which the group operates; the details of each constituent entity of the group including the country or territory in which such constituent entity is incorporated or organised or established and the country or territory where it is resident; the nature and details of the main business activity or activities of each constituent entity; and any other information as may be prescribed. Reporting requirement: Every resident constituent entity of the international group, whose parent is non-resident, shall notify in the Form 3CEAC , atleast 2 months prior to due date for furnishing CbC report stating: Whether it I the alternate reporting entity of the international group, or Details of parent entity/ alternate reporting entity of the interanational group the country of which the said entities are resident. Furnishing of CbC Report by resident constituent entity A constituent entity of International group resident in India, other than parent entity or the alternate reporting entity, shall be required to furnish CbC report within 12 months from end of accounting years In which it is not obligated to file CbC report With which India does not have an arrangement for exchange of CbC report; or Within 6 Months In case such country is not exchanging information with India even though there is an agreement, and the fact has been intimated to the entity by JDIT (System Failure). Nomination of one constituent entity for furnishing CbC report - where there are more than one such constituent entities of the group, resident in India in Form 3CEAC, the report shall be furnished by any one constituent entity, if,- the international group has designated such entity to furnish the report on behalf of all the constituent entities resident in India; and the information has been conveyed in writing on behalf of the group to the prescribed authority. Income Tax Department designates Income tax Authority before whom particulars of parent entity and alternate reporting entity to file Country-by- Country Report would be notified. [ Press Releases ] In order to ensure that a multinational enterprise would report its profit correctly where it is earned, the Organisation for Economic Cooperation and Development (OECD) had developed an Action Plan called Base Erosion and Profit Shifting (BEPS) Action Plan 13 . Under BEPS Action Plan 13, all large multinational enterprises (MNEs) are required to prepare a country-by-country (CbC) report with aggregate data on the global allocation of income, profit, taxes paid and economic activity among tax jurisdictions in which they operate. In essence, CbC Report is an annual return that breaks down key elements of the financial statements by jurisdiction. A CbC report provides local tax authorities visibility to revenue, income, tax paid and accrued, employment, capital, retained earnings, tangible assets and activities of the concerned MNE. This CbC report is used as a corroborating material by Income tax Authorities in carrying out revenue risk assessment. As per corresponding provisions of Indian Income tax Laws, every MNE group which has a constituent entity resident in India is mandated to notify the Income-tax Department its parent entity and alternate reporting entity and the countries where such entities are resident. Such parent entity or alternate reporting entity is required to furnish a report called Country-by-Country Report specifying certain information including: (a) the aggregate information in respect of the amount of revenue, profit or loss before income-tax, amount of income-tax paid, amount of income-tax accrued, stated capital, accumulated earnings, number of employees and tangible assets not being cash or cash equivalents, with regard to each country or territory in which the group operates; (b) the details of each constituent entity of the group including the country or territory in which such constituent entity is incorporated or organised or established and the country or territory where it is resident; (c) the nature and details of the main business activity or activities of each constituent entity . For the above stated purpose, the Central Board of Direct Taxes(CBDT) had notified Rules 10DA , 10DB and Form Nos. 3CEAA to 3CEAE in Income-tax Rules, 1962 . The Income Tax (2nd Amendment) Rules, 2020 has amended rules 10DA and 10DB and notification no. 03/2020 dated 06.01.2020 has already been issued in this regard. As per the amended rule 10DB(1), the income tax authority for the purpose of section 286 shall be the Joint Commissioner as may be designated by the Director General of Income tax (Risk Assessment). In view of the above amendment and in exercise of the powers conferred by section 286 of the Act, the Director General of Income tax (Risk Assessment) has designated the Joint Director of Income tax (Risk Assessment)-1 having office at 4 th Floor, C-Block, Dr. S.P. Mukherjee Civic Centre, Minto Road, New Delhi-110002 as the Income tax Authority for the purpose of section 286 of the Act, with effect from the first day of April, 2020.