CBDT’s draft Master File and CbCR Rules – How Indian subsidiary of foreign MNE is affected?

October 09,2017
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Manisha Gupta (Partner, Deloitte Haskins & Sells LLP)

Setu Mankad (Director, Deloitte Haskins & Sells LLP)

The Finance Act 2016 introduced provisions relating to the Country by Country Report (CbCR) and master file pursuant to adoption of OECD’s BEPS Action Plan-13 in India.

While the law was enacted and it was made applicable with effect from 1 April 2017 (i.e. from AY 2017-18 onwards), the detailed rules stipulating relevant threshold, manner and time limit for maintaining and furnishing relevant information was eagerly awaited.

Finally, the CBDT has released draft rules on 6 October 2017 providing much awaited guidelines with respect to maintenance and furnishing of Master File and CbCR, for the public comments and suggestions.

Summarized below are some of the key aspects relevant to Indian subsidiaries of foreign multinational enterprises.

Maintaining and furnishing Master File (Rule 10DA)

  • It is proposed to insert Rule 10DA prescribing threshold for applicability of Master File, information and documents required to be maintained by the taxpayer under Master File, time line and the manner in which it shall be furnished to the tax authorities.
  • The Master file is required to be prepared by the taxpayer, also referred to as constituent entity, which meets following conditions –
    • Consolidated revenue of the international group of which the taxpayer is part of, exceeds INR 500 crores in the immediately preceding accounting year; and
    • Value of international transactions of the taxpayer during the reporting period
      • exceeds INR 50 crores in aggregate; or,
      • exceeds INR 10 crores involving sale, purchase, transfer, lease or use of intangible property.
  • The draft Rules have prescribed Form No. 3CEBA for furnishing the Master File details with Director General of Income-Tax (Risk Assessment). The due date for furnishing the said form has been set as due date for filing the return of Income u/s 139 of the Act, i.e. 30 November. However, considering the limited time on hand to furnish the said form in respect of FY 2016-17, the draft rule has proposed to extend the due date in respect of FY 2016-17 till 31 March 2018.
  • It may be noted that Form 3CEBA has been divided into two parts; Part-A and Part-B. Part-A consists of limited information relating to details of taxpayer, international group to which it belongs to, number of group entities in India and their permanent account number, addresses, etc. Part-B requires exhaustive and descriptive information on more than twenty items listed as part of Master File.
  • The contents of the master file proposed in Rule 10DA are largely in line with the OECD Action-13 recommendations. Additionally, the draft rules also propose taxpayer to maintain following:
    • list of all the operating entities of the international group: The management of Indian companies of foreign conglomerates having numerous legal entities across the globe will have to compile and furnish relevant data, which could be enormous task for Indian companies.
    • list of entities engaged in development and management of intangibles;
    • details of top ten unrelated lenders: It is unclear as to what could be the rational for furnishing details of unrelated lenders.
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