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MNCs will have to furnish extra disclosures from March 2018
November, 02nd 2017

Multinational companies operating in India will have to furnish additional disclosures from March 2018 in line with international principles adopted at the multilateral Organisation for Economic Cooperation and Development (OECD) to prevent tax evasion.

The Central Board of Direct Taxes (CBDT), the apex direct taxes body, has notified the final rules for MNCs to comply with country-by-country reporting norm. These deal with maintaining and furnishing of transfer pricing documentation in the Master File and Country-by-Country report (CbCR).

The government had inserted Section 286 in Income-tax Act, 1961 vide Finance Act, 2016 for furnishing of a country-by-country report in respect of an international group by its constituent or parent entity.

"Since it is the first reporting year for furnishing of the country-by-country report, the due date for filing the country-by-country report for reportable accounting year 2016-17 has already been extended to March 31, 2018.... Similarly, the date of compliance for furnishing the Master File for FY 2016-17 has been extended to March 31, 2018 as a one-time relief measure,” CBDT said in a statement on Wednesday.

Country-by-country reporting norms are in keeping with India’s commitment to implement OECD’s base erosion and profit shifting or BEPS project. MNCs will need to provide aggregate information annually, in each jurisdiction where they do business, relating to the global allocation of income and taxes paid, together with other indicators of the location of economic activity within the group.

It will also cover information about which entities do business in a particular jurisdiction and the business activities each entity engages in. The threshold for the country-by-country report is total consolidated group revenue of Rs 5,500 crore. The threshold for the master file is consolidated group revenue of Rs 500 crore.

Tax experts said the notification of the final rules denotes increased focus of Indian tax authorities on tax transparency and ensuring that the outcomes of transfer pricing policies are in line with value creation linked to Indian operations. “The notification of CbCR rules is likely to usher in a rigorous regime of compliance and disclosure for foreign MNCs working in India,” said Amit Agarwal, partner- transfer pricing, Nangia & Co LLP.

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