Master File & CbCR Draft notification - A bird’s eye view
Vaishali Mane (Chartered Accountant, Mumbai)
Nandkumar Raman (Chartered Accountant, Chennai)
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:
|
Rule |
Description |
Criteria |
Evaluation period |
Threshold – exceeding Rs. |
Time Limit |
|
10DA Master File |
Information and documents (Master File / MF) to be kept, maintained and furnished by a constituent entity / parent entity / alternate reporting entity of an International group as per Section 92D – Form 3CEBA |
(i) Consolidated revenue of the international group |
Immediately preceding previous year |
500 Crores |
31 March 2018 |
|
AND |
|||||
|
(ii) A. Value of international transactions of the constituent entity |
Year under consideration |
50 Crores |
|||
|
OR |
|||||
|
(ii) B. Value of international transactions involving intangibles of the constituent entity |
Year under consideration |
10 Crores |
|||
|
Rule |
Description |
|
|
10DB CbCR |
Furnishing of CbC Report by a constituent entity / parent entity / alternate reporting entity of an International group, if the total consolidated group revenue exceeds INR 5,500 Crores |
- |
| - | ||
| - |
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:
|
Rule |
Information to be filed |
Forms & due date – FY 2016 - 17 |
Remarks |
|
10DA(2) MF |
Master file to be filed by a constituent entity of an international group, satisfying the laid down criteria |
3CEBA 31 Mar 2018 |
Part A – to be filed by all the constituent entities Part B – to be filed by entities satisfying the laid down criteria |
|
10DA(5) MF |
Intimation to the authorities concerned in respect of the constituent entity that would be filing the MF, where there are more than 1 constituent entity in India |
3CEBE 01 Mar 2018 |
The due date as specified under section 139(1). |
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:
|
S. No. |
Country |
S. No. |
Country |
S. No. |
Country |
S. No. |
Country |
|
1 |
Australia |
7 |
Colombia |
13 |
Indonesia |
19 |
South Korea |
|
2 |
Austria |
8 |
Costa Rica |
14 |
Japan |
20 |
Spain |
|
3 |
Belgium |
9 |
Denmark |
15 |
Mexico |
21 |
Sweden |
|
4 |
Bosnia and Herzegovina |
10 |
Finland |
16 |
Netherlands |
22 |
Uruguay |
|
5 |
Bosnia and Herzegovina |
11 |
Gabon |
17 |
Peru |
23 |
Vietnam |
|
6 |
China |
12 |
Germany |
18 |
Poland |
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.