The due dates for submitting the Master File u/s 92D and Country by Country Report (CbCR) u/s 286 are fast approaching. Certain forms (3CEAA to 3CEAE) have to be submitted by qualifying companies to the income tax department. Our article address the salient features of this compliance requirement
What is Master File? What is CbCR?
In 2017, & in line with OECD’s Base Erosion & Profit Shifting (BEPS) Action Plan 13, India announced rules for filing various details with the income tax department. These include,
- Maintaining and filing the Master File (MF), and
- Furnishing the Country by Country Report (CbCR)
The information submitted provides the Indian tax office visibility to the revenue earned, taxes paid and assets owned by the multi-national group the company belongs to. This will also help the tax authorities assess risk of tax exposures arising from international transactions.
Before we understand the nuances of filing, we need to understand the following terms
- Constituent entity (CE) – CE means an entity of the group that would be includible in consolidated financial statements of the International Group. A Permanent Establishment in India is also a CE.
- 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;
- Alternate Reporting Entity (ARE) – means any CE of the international group that has been designated by such group, in the place & on behalf of the parent entity, to furnish the report in the country of residence of that CE.
- 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
Who should file MF & CbCR?
- Master File
- Every CE in India will have to maintain information about the international group it belongs to. This information will have to be filed with the income tax authorities. Depending on the size of the group, the information submitted would be basic or detailed.
- Every CE will have to file basic information contained in Part A of Form 3CEAA.
- The following CEs will have to file detailed information contained in Part B of Form 3CEAA.
- Consolidated group revenue exceeds: Rs.500 Crores (~ $ 77Mn), AND
- Aggregate value of international transactions in the year exceeds R.s 50 Crores ($7.7 M) or where the international transaction concerns purchase, sale or lease of intangible assets, this limit will be considered as Rs. 10 Crores ($1.5 M)
- The detailed information includes information regarding all entities in the group, description of business, transfer pricing arrangements, strategy, intangible property and central financing functions.
- Country by Country Report
- CbCR in Form 3CEAD has to be filed by CEs belonging to the international group having consolidated group revenue of the preceding accounting year in excess of Rs.5,500 Crores (approx. $ 800M based on Dec 2016 rate).
- Form contains following info:
- Jurisdiction wise revenues, profits, tax, capital, accumulated earnings, # of employees & tangible assets
- Entity wise info on main business activities
- Further, Every CE resident in India, if its parent is not resident, must file 3CEAC. This is an intimation as to whether the CE is an alternate reporting entity or not.
What if there are two or more CEs in India?
In this case,
- One of the CEs could be designated to submit the Master File or the CbCR.
- With respect to MF, the Designated CE would be required to file Form 3CEAB which contains details basic details about the designated CE, international group and parent entity
- With respect to CbCR, the Designated CE would be required to file Form 3CEAE which again contains similar details.
What is the due date of filing MF and CbCR?
- Form 3CEAA (Part A and Part B) – Master File has to be filed before 30 November 2018 for the FY 2017-18.
- Form 3CEAD – CbCR has to be filed within 12 months from the end of the Accounting Year (as defined above). For example, if the accounting year ends 31 Dec 2017, the due date shall be 31 December 2018.