New Delhi, March 25, 2018

MNCs in countries with which India does not have a pact for exchange of reports are exempt from furnishing details

The Central Board of Direct Taxes (CBDT) has clarified that March 31 deadline for furnishing Country-by-Country (CbC) reports will not apply to certain Indian subsidiaries of MNC groups.

The deadline will not apply to Indian subsidiary companies of foreign MNCs, ultimate parent companies of which are residents of countries, with which India still does not have any agreement for exchange of information relating to CbC reporting, the CBDT said.

The due date for furnishing of CbC reports in such cases will be prescribed after the enactment of Finance Bill 2018, the CBDT said.

The clarification is important especially in the context of US with which India still does not have an agreement for exchange of CbC report. Several MNC groups residing in the US and other countries with which India does not have such agreements were apprehensive on whether they need to file CbC reports with Indian authorities for their respective groups through their subsidiary companies in India by March 31.

Commenting on the CBDT clarification, Rahul Mitra, Partner, KPMG India, said CBDT has said the date for filing of CbC reports in such cases would be notified later. “This brings relief for several foreign MNCs of such nature,” Mitra told BusinessLine.

Tax transparency

CbC reporting is seen as a new world order for tax transparency and allocation of fair share of taxes corresponding to economic activity in a jurisdiction.

The OECD’s objective of mandating CbC is to ensure that all relevant tax authorities have access to the same information about an MNE group’s value chain and the resulting tax consequences.

CbC reports, to be electronically transmitted between competent authorities, will assist tax administrations in obtaining a complete understanding of the way in which multinational enterprises (MNEs) structure their operations, by annually providing them with key information on the global allocation of income and taxes paid.

It is to cover information about which entities do business in a particular jurisdiction and the business activities each entity engages in.

The information to be included in the CbC report will be collected by the country of residence of the reporting entity for the MNE group, and will then be exchanged under the relevant international exchange of information agreement.

It may be recalled that Finance Act 2016 had provided for furnishing of a CbC report in respect of an international group.

The CbC report is to be furnished by the ultimate parent entity of an international group in the country or territory of its residence.

[The Hindu Business Line]