In order to standardize the documentaion for transfer pricing in India. CBDT had brought in Secion 286 of the Income Tax Act, 1961 (“the Act”) which states that an Indian constituent entily needs to intime CbCR to the Indian Tax authories containing certain infornation relating to the global allocation of the Multi-national Enlity (“MNE”) income and taxes paid together with certain indicators of the locaton of economic activity within the MNE group.
Applicability and Reporting
For the purpose of such reporting, certain rules were notified under Ruie 10DB of the Income Tax Rules, 1962 (“the Rules”) stating that a constituent entity, which is part of an international group having turnover exceeding 5,500 crores, in an accounting year needs to comply with following forms:
1. Form 3CEAC0- Intimation to the requisite officer that whether it is the alternate reporting entity for the group along-with details of parent or alternate reporting entily and their country of residence at least two months prior to reporting of information in Form 3CEAD.
2. Form 3CEAD- Reporting of information about the international group as specified in the form iself
3. Form 3CEAE- Designating of one entity to comply with reporting of Form 3CEAD in case there are more than one such entities in India
However Government had not earlier notified the period within which Reporting under Form 3CEAD or Form 3CEAE was to be made.
Notification no. 88/2018
Government had recenly made an amendment in sub-rule 4 of Rule 10DB of the Rules vide Notification no. 88/2018 dated 18 December, 2018 that, The period for furnishing of the report under sub-section (4) of section 286 by the constituent entity referred to in that sub-section shall be twelve months from the end of the reporting accounting year
For instance, if a country considers a calendar year as its accourting year, then any parent entity in that country shall file CbCR for its latest compleled accounting period 2017 by 31st December 2018.
1. Constituent Entity means any separate entity of an international group that is included in the consolidated financial statement of the said group for financial reporting purposes or permanent establishment of any separate business entity of the international group.
2. Accounting period means an annual accounting period, with respect to which the parent entity of the international group prepares its financial staterments under any law for the time being in force