India Finalizes Pricing Reporting Rules Under OECD Plan
November, 20th 2017
India’s tax authority on Wednesday announced rules covering how multinational companies are expected to disclose transfer pricing information for each country where they operate, measures that are part of government’s alignment with the Organization for Economic Cooperation and Development’s efforts to curb corporate tax avoidance. The Central Board of Direct Taxes, a division of India’s Ministry of Finance, released a statement outlining the transfer pricing disclosure requirements under country-by-country reporting rules it had issued in 2016 under changes to the Income Tax Act. India added sections to its tax code at the time in response to reporting recommendations that the OECD had set out as part of its larger base erosion and profit shifting plan — the culmination of the organization’s effort to tamp down international tax avoidance.
County-by-country reporting, which falls under Action 13 of the BEPS plan, is a way for multinational entities to annually share with tax authorities the business that they do in each tax jurisdiction where they operate. The reports are designed to promote transparency in part by sharing information on high-level transfer pricing.
Transfer pricing is seen as a large contributor to tax avoidance because it can allow companies to shift profits to low-tax jurisdictions.
The OECD issued its BEPS plan in October 2015, and dozens of jurisdictions, including India, subsequently took legislative steps to incorporate the organization’s recommendations, including those for country-by-country reporting.
As for India, the board issued a statement early last month announcing that it was seeking public feedback on its plan to insert transfer pricing rules that were proposed after the government made its initial tax code changes in 2016.
According to the board, the rules would set guidelines for how companies are expected to maintain and produce pricing documentation in their country-by-country reports. The rules also relate to a “master file” that certain multinational companies must keep, which was set out in the 2016 legislative changes.
In the statement issued on Wednesday, the board noted that it has decided to move forward with the rules after considering the recommendations from a committee it had established in addition to the comments it received.
“After examining the recommendations of the committee set up in this regard and comments and suggestions received from stakeholders and general public, the Central Board of Direct Taxes has notified the rules for maintaining and furnishing of transfer pricing documentation in the master file and country-by-country report,” the board said.
Country-by-country reports will be due on March 31, but not all multinationals will have to submit them.
For multinational companies to be required to file a country-by-country report, the corporate family must bring in a total revenue of at least 5,500 crore rupees ($852 million), according to the board.
In addition, multinational companies making a total of 500 crore rupees will be required to keep a master file, the board said.