BEPS ACTION PLAN-COUNTRY-BY-COUNTRY REPORT AND MASTER FILE
As per the existing provisions of transfer pricing laws, there is requirement for maintenance of prescribed information and document in relation to international and specified domestic transaction.
OECD report on Action Plan 13 of BEPS Action Plan proposed revision in transfer pricing documentation and formulated a three tier structure for the purpose of documentation which is as follows
|Country-by-Country Reporting ( For each tax jurisdiction of business)||
|-Global allocation of income
-Amount of revenue (related and unrelated party)
-Income tax paid and taxes accrued
-Stated capital and retained earnings
|– The group’s organizational structure
-Description of business
-Inter company financial activities
-Financials and tax positions
|-Transactions taking place between associated enterprises
-Selection of most appropriate transfer pricing method.
-Comparability adjustments, etc.
In order to bring in consensus with global economy, it is proposed to include some elements of CbC and Master file in the current provisions of the Act, which are as follows:
– This reporting shall be applicable if the international group has consolidated revenue of 750 million Euro
– Parent Entity of the international group, if resident in India, shall furnish the required report to the prescribed authority on or before the due date of filing of return
– For the above purpose, the parent entity shall be an entity which is required to prepare consolidated financial statement under the applicable laws or would have been required to prepare such a statement, had equity share of any entity of the group been listed on a recognized stock exchange in India
– Every constituent entity resident in India, of an international group, having parent entity that is not resident in India, shall provide information regarding the country of residence of the parent of the international group to which it belongs before the prescribed date to prescribed authority
– The report shall be furnished in prescribed manner and form which contains all information based on the template provided in OECD BEPS report on Action Plan 13
-The constituent entity in India shall be required to furnish CbC report if the parent entity of the international group is resident of country with which India does not have arrangement or agreement to exchange CbC reports or with a country who is not exchanging information even though there is an agreement and this fact is known to the constituent entity
-If there are more than 1 entities of same group in India, the group shall nominate, in writing to prescribed authority, either of the entity to report on behalf of the group
-In case parent entity is not resident in India and international group has designated an alternate entity to file the report on its behalf, then the entities of such group operating in India shall not be required to do any reporting if Indian tax authorities can obtain reports filed by the alternate entity under the agreement of exchange of reports
-The reports submitted by the entity shall be subject to scrutiny and assessment, through issue of notice, to verify the accuracy. The entity shall be required to make necessary submissions, in case details and information asked, within 30 days or extended period of 60 days from the date of receipt of notice.
Further, for non-submission of information when called by prescribed authority, the penalty shall be Rs.5,000 per day and if the order levying such penalty is serviced, the penalty shall be Rs.50,000 per day for default beyond date of service of such order
MAINTENANCE OF MASTER FILE
The entities, being constituent of international group, shall maintain information and documents as prescribed and the same shall be furnished to the prescribed authority in the manner and form as may be prescribed
Non furnishing of information and document shall attract penalty of Rs. 5 lakhs. However, reasonable cause defence against levy of penalty shall be available to the entity.
These amendments shall apply for the Assessment year 2017-18 and subsequent assessment years.
-Penalty of Rs.5,00,000 shall apply if the entity has provided any inaccurate information in the report and does not inform about the inaccuracy to the prescribed authority or corrects the report within 15 days but fails to inform or furnishes inaccurate information or document in response to notice of prescribed authority. However, reasonable cause defence against levy of penalty shall be available to the entity.
For default in furnishing of the report by an entity, following penalty shall be levied:-
Time period of default
Amount of Penalty
Up to 1 month
|Rs. 5,000 per day|
Beyond 1 month
|Rs. 15,000 per day for days in excess of 1 month|
|After service of order levying penalty under (a) or (b) above||
Rs. 50,000 per day for days beyond the date of service of order