CBDT has come out with the draft rules governing the applicability of Country-by-Country Report (CbCR) and the contents and applicability of Master File (MF) to constituent entities in India. It is a real welcome move on the part of CBDT to seek comments/ observations on the contents from the stake holders before finalising the Rules.

CbCR regulations:

The two rules proposed to be inserted are as under:

The draft rules have provided the list of information to be captured in the MF and which is as per the BEPS Action 13 issued by the OECD. The information and the details to be compiled in the master file has to be prepared by the parent entity or the entity that has knowledge on the activities carried on by the entire group, else there is a possibility that a critical information is not presented, leading to submission of insufficient information or filing of incorrect information, which would result in the levy of penalty.

Contents of Master File:

The information to be captured in the MF as provided in the draft notification (Rule 10DA(1)) are broadly classified into the following four categories:

(i) Description of the business, (ii) Particulars of intangibles, (iii) Particulars of financing activities, (iv) General information

CbCR & Master file – forms & due dates:

In addition to the above, the draft notification has prescribed the forms for filing MF and CbCR for FY2016 – 17 as well as the due dates, which are as under:

However for FY 2016 – 17 the due date has been extended to 01 March 2018

10DB(2)

CbCR

Constituent entity to notify as to whether it is the alternate reporting entity or furnish the particulars of Parent entity/ alternate reporting entity

3CEBB

1 Sep 2017.

The due date for filing has already lapsed.

10DB(3)

CbCR

Parent entity / alternate reporting entity resident in India to file CbCR information

3CEBC

30 Nov 2017

10DB(4)

CbCR

If more than one constituent entity is in India, whose parent entity / alternate reporting entity is a resident in certain jurisdictions – then the Indian constituent entity nominated by the Parent entity in this behalf has to notify in Form No. 3CEBD – Section 286(4)

3CEBD

30 Nov 2017

Challenges: in filing

The particulars of information called for in the Master file are descriptive in nature and hence it becomes a requirement to prepare and attach files in multiple formats. For example, the supply chain information of top products could be effectively presented in the form of a flow chart / PDF document as against providing information in a tabular format. We have to wait and watch as to how the CBDT / delegated authority would be implementing the filing procedures.

Global arena:

With the publication of the draft MF regulations and on implementing the MF regulations, India would join the league of 23 countries that has already implemented the MF in their tax regulations. The countries that have already introduced MF regulations are as under:

The above countries that have implemented the filing of Master File in their tax regulations have predominantly adopted the XML Schema and guidelines as provided by the OECD Vide BEPS Action 13, in addition to electronic filing of the information, OECD allows filing of additional information through separate attachments as well.

In this regard, would like to highlight that the Australian Tax Office (ATO) had allowed tax payers to upload documents in multiple file formats while filing the statutory forms. The formats that are allowed to be uploaded by the ATO includes the following format:

Conclusion:

Considering the above, foresee that the Indian revenue authorities would provide detailed guidance with regard to the electronic filing of the CbCR and Master File. In addition to filling and filing of forms, hope the Indian Revenue Authorities would consider uploading of information in the form of an attachment to the XML schema.