02 February 2018

Union Budget 2018 – Transfer pricing proposals relating to Country-by-

Country Report regulations

The Finance Minister presented the Union Budget 2018 each taxpayer to whom CbCR provisions are
on 1 February 2018. From a transfer pricing (TP) applicable.
perspective, the Finance Bill, 2018 proposes certain For FY 2016-17, the first reporting year for the
amendments, clarificatory in nature, with respect to the
furnishing of CbCR, the timeline was already
implementation of Country-by-Country Report (CbCR)
extended by the Central Board of Direct Taxes
filing obligations. The amendments would take effect (CBDT) to 31 March 2018 vide Circular No. 26 of
retrospectively from 1 April 2017 and will, accordingly, 2017. Therefore, the proposed amendment would
apply in relation to the assessment year 2017-18
not impact the filing timeline for FY 2016-17 in
[Financial Year (FY) 2016-17] and subsequent years. most of the cases.

Vide the Finance Act, 2016, with effect from FY 2016-17, The timelines under different cases would be as
the Indian Government implemented a three-tier under –
documentation structure as per the recommendations of
 In cases of a parent entity or an Alternative
Organisation for Economic Co-operation and Reporting Entity (ARE) of an international
Development (OECD) under Action 13 of the Base
group, resident in India [i.e. the cases falling
Erosion and Profit Shifting (BEPS) initiative. The CbCR
under section 286(2)], with the typical
and Master File (MF) requirements were introduced in
reporting accounting year ending on 31st
addition to the already existing local documentation March, the due date for filing the CbCR would
requirements. The detailed rules in respect of CbCR and
be 31st March of the subsequent year. The
MF regulations were released on 31 October 2017 after proposed amendment therefore provide
a public consultation process. However, certain issues additional time of four months in addition to
remained unclear, requiring clarifications. Now vide the the existing time limit of eight months from the
Finance Bill 2018, the clarificatory amendments as end of the accounting year in such cases
mentioned above seem to provide clarity on certain such
issues related to the CbCR.  In cases of constituent entity (CE) resident in
India, having a non-resident parent, required
to locally file CbCR under the provisions of
Timeline for furnishing CbCR extended section 286(4), the due date for filing the
As per the existing provisions under section 286(2) of the CbCR would be twelve months from the end
Income-tax Act, 1961 (the Act), wherever applicable, the of the reporting accounting year. The reporting
CbCR is required to be furnished, in the Form No. accounting year in such cases would be the
3CEAD, on or before the due date of furnishing the annual accounting period followed by the
return of income for the relevant accounting year parent entity. In such cases, for example, if
(currently 30th November following the financial year- the reportable accounting year ends on 31
end). The amendments as per the Finance Bill 2018 December, the due date for filing the CbCR
proposes to extend the time limit for furnishing the CbCR would be 31 December of the subsequent
to 12 months from the end of the reporting accounting year.
year. The due date would therefore vary for each case
depending on the reporting accounting year for

© 2018 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.
CbCR to be furnished where foreign parent
entities not obligated to file the report
The amendments as per the Finance Bill 2018 proposes to
extend the obligation of furnishing the CbCR, in the Form
3CEAD, by CEs resident in India, having non-resident
parent, in case the parent entity outside India has no
obligation to file a CbCR in its country or territory. This has
been proposed vide an amendment to section 286(4) by
the Finance Bill. However, in such cases where the non-
resident parent has appointed an ARE, the Indian
constituent entity shall not be obliged to file the CbCR in
India subject to the conditions specified in section 286(5)
being fulfilled.
Section 286(5) provides exemption to the Indian
constituent entity from furnishing the CbCR locally in India
which may otherwise be required under sec 286(4), if ARE
of the international group furnishes the CbCR in the
country of which it is a resident. For the exemption to
apply, the earlier provision required ARE to furnish the
CbCR by the due date of furnishing tax return in India. The
Finance Bill proposes to amend section 286(5) to specify
the due date for furnishing of CbCR by the ARE as the due
date specified by the country of which it is a resident.

Relevant agreements
The existing definition of the phrase ‘agreement’ under
section 286(9) refers to agreements under section 90(1)
and section 90A(1) i.e. bilateral agreements entered into by
the Indian Government with foreign countries, specified
territories or specified associations in such territories, for
avoidance of double taxation including tax avoidance and
tax evasion issues. Now, the amendment as per Finance
Bill 2018 proposes to amend the definition of ‘agreement’
to mean a combination of the aforesaid bilateral
agreements and any agreements entered into for
exchange of CbCR as notified by the Government.

Our comments
The proposed amendments provide the necessary
clarifications for the effective implementation of the CbCR
mechanism and can help taxpayers with the necessary
compliances. The need for lodging CbCR in India for
taxpayers where the parent company is not required to do
so in its own jurisdiction, is rather onerous. It is however,
consistent with the Government of India’s efforts to seek
the fullest possible compliance.

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International”), a Swiss entity. All rights reserved.
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