Indian tax authority sets new CbC reporting deadline for US subsidiaries

Indian tax authority sets new CbC reporting deadline for US subsidiaries

By Maulik Doshi (Partner, Head of Transfer Pricing & International Tax, SKP Group) and Kamlesh Kaltari (Senior Manager, SKP Group)

In India, the 2016 Finance Act introduced a three-tiered transfer pricing documentation regime with a view to aligning the Indian transfer pricing documentation rules with Action 13 of the OECD’s base erosion and profit shifting (BEPS) project.

Accordingly, Indian subsidiaries of multinational groups were required to comply with new “master” and “local” files requirements and a new country-by-country reporting requirement from the 2016-17 financial year.

The final rules issued by the Indian tax authority in October 2017, and as contained in section 286 of the Income Tax Act, require Indian constituent entities of multinationals to furnish a CbC report in India. The CbC reporting requirement applies where the group consolidated turnover of the multinational enterprise exceeds INR55bn.

The rules impose an obligation on the Indian subsidiary company to file CbCR if:

  • The parent company is not required to file a CbC report in its country; or
  • There is no Multilateral Competent Authority Agreement (MCAA) for the exchange of CbC reports between India and the country of the ultimate parent company/alternate reporting entity; or
  • There has been a systematic failure in exchange of CbC reports.
However, no due date for such filing was specified.

March 31, 2019 is the new deadline

Interestingly, on December 18, 2018, the Indian tax authority issued a notification prescribing the due date for filing CbC reports locally by Indian subsidiaries of foreign parents. The timeline prescribed was 12 months from the end of the reporting accounting year, that is, December 31, 2018.

However, upon recognizing the hardship faced by taxpayers, especially to Indian subsidiaries of US parents, in complying with the short deadline, the tax authority has now extended the deadline until March 31, 2019.

The tax authority clarified that the revised deadline will apply in relation to all reporting years up to February 28, 2018. Accordingly, the due date for filing CbC reports in India is March 31, 2019, in respect of a group with year ending December 2016 and December 2017.

It is recommended for MNE Groups to comply with the new deadline to avoid strict penalty implications for non-compliance, especially given that there is no guarantee that the impacted jurisdictions (such as the US) would enter into a MCAA with India before March 31, 2019.

India's tax authority sets new CbC reporting deadline for US subsidiaries

Maulik Doshi is Partner and Head of Transfer Pricing & International Tax team at SKP Group. He tweets @maulikdoshi 

Kamlesh Kaltari is Senior Manager at SKP Group. He tweets @KKaltari