Master File and CBC reporting

Introduction:

Indian Income-tax law has come up with a three-tier documentation structure, by following the recommendations of Organization for Economic Cooperation and Development (OECD) under Action 13 of the Base Erosion and Profit Shifting (BEPS) project.

The Finance Act, 2016 introduced Section 286 to the Income-tax Act, 1961 providing for furnishing of Country by Country (CbC) report in respect of an international group. Section 92D of the Act which contained provisions for preparing TP documentation was also amended to provide for the furnishing of Master File.

Rules 10DA and 10DB have been inserted in the Income-tax Rules, 1962 (the Rules). Forms 3CEAA, 3CEAB, 3CEAC, 3CEAD, and 3CEAE have also been notified under the above rules.

A. Rule 10DA (Section 92D) lays down the thresholds for applicability, timelines, requirements, and procedures in relation to Master File. The relevant information and intimation related to Master File is required to be filed in Forms 3CEAA and 3CEAB

B.  Rule 10DB (Section 286) lays down the requisite details and procedures for CbC report filing. The relevant information and intimations are required to be filed in Forms 3CEAC, 3CEAD, and 3CEAE. 

A.   Master File (MF) – Rule 10DA

As per rule 10DA, if the international group satisfies the following both conditions, a detailed master file should be filed by the Constituent entity resident in India:

Sl. No	Particulars	Threshold limit	Timeline for filing
1	Consolidated group revenue of the ‘International Group’ for the accounting year exceeds	INR 500 crore	To be filed on or before the due date for filing of Return of Income (i.e.,   30th Nov).
AND
2	The aggregate value of the international transaction a.  During the accounting year, as per books of accounts exceeds OR b.     In respect of purchase, sale, transfer, lease or use of the intangible property during the accounting year, as per the books of accounts exceed	INR 50 crore OR INR 10 crore

Requirements under the relevant forms are provided below:

Form 3CEAA: The Rules require the filing of Master File in Form 3CEAA. The form consists of two parts –

a.  Part A is required to be filed by every Constituent Entity (CE) of an international group whether or not it satisfies the aforesaid dual thresholds. This part requires disclosure of basic details such as the name of the group, the number of CEs in India, their names, addresses and Permanent Account Number (PAN), etc.

b.  Part B of the form is required to be filed only by those CEs which satisfy both of the thresholds mentioned in the table above.

Form 3CEAB: Where an international group has more than one CEs resident in India, the group may opt to designate a CE that shall be obliged to file Form 3CEAA and intimation of the same is filed by the designated CE in Form 3CEAB with the Director-General of Income-tax at least 30 days prior (i.e. 30^th Oct) to the due date of filing the Form 3CEAA.

Simply to say, If only one CE in India then no Form 3CEAB. If more than one CE is resident in India, then the group shall designate a CE that shall file Form 3CEAA and that designated CE shall intimate the same to ITO in Form 3CEAB.

B.   Country by Country Report – Rule 10DB

Threshold limit:

The provisions of Section 286 shall be applicable in respect of an international group for an accounting year, only if the total consolidated group revenue, as reflected in the consolidated financial statements exceeds the amount of Five Thousand Five Hundred Crore Rupees.

 Requirements under the relevant forms are provided below:

Sl.No	Situation	Requirement	Due date
1	Parent entity or alternate reporting entity, resident in India (Section 286 (2))	File CbC Report in Form 3CEAD (for every reporting accounting year).	Within a period of 12 months from the   end of said reporting period i.e. 31st March of the next financial year
2	Constituent entity resident in India, of Parent entity not resident in India (Section 286 (1))	File CbC Report notification in Form 3CEAC to the Director-General of Income-tax (Risk Assessment).	At least 2 months before the date of furnishing of CbC Report in Form 3CEAD i.e. 31st January of next financial year
3	Constituent entity resident in India, of parent entity not resident in India – Specified cases as follows: ·   Where Parent entity is not obliged to file the report in its country ·   India doesn’t have an agreement for the exchange of CBC report with Country of Parent Entity ·  Systematic Failure of the other country to share CBC report	File CbC Report in Form 3CEAD (for every reporting accounting year). In case there is more than one CEs resident in India, the international group may opt to designate a CE, which will file Form 3CEAD. The Intimation of the same needs to be filed by the designated CE in Form 3CEAE with the Director-General of Income-tax (Risk assessment)	Form 3CEAD: Within a period of 12 months from the end of said reporting period i.e. 31st March of next financial year Form 3CEAE: No Specific due date is mentioned.