By Gaurav Jain, Chartered Accountant, and Priya Bhutani, New Delhi, India
India’s Central Board of Direct Taxes on April 5 amended its transfer guidance, simplifying master file submissions and increasing the threshold for country-by-country reporting. The amendments, in Notification No. 31/2021 / F.No.370142/19/2019-TPL, will apply from April 1 and are welcome news for taxpayers.
In 2017, India adopted the three-tiered transfer pricing documentation requirements in line with the OECD base erosion and profit shifting (BEPS) plan action 13 report.
The applicability threshold for country-by-country reporting was implemented consistently with the BEPS report, i.e., INR 5500 crore (USD 740 million). However, the master file requirement was prescribed only for companies that met two thresholds. First, the company’s consolidated group turnover must exceed INR 500 crore (USD 67 million). Second, the value of the company’s intercompany transaction(s) during the year must exceed INR 50 crore (USD 6.7 million), or its transactions in respect of the purchase, sale, transfer, lease, or use of intangibles must exceed INR 10 crore (USD 1.35 million).
In cases where the master file requirement applied to more than one constituent entity of group resident in India, taxpayers were required to file a notification indicating which designated entity was obliged to adhere to the master file requirement.
Under the regulations, companies filed the designation form for the master file for entities resident in India (such as subsidiaries, associates, joint ventures). However, companies had to file a separate master file for non-resident constituent entities taxable in India, such as permanent establishments, project offices, branch offices.
Master file
Under the new guidance, the designation form must now include details of all resident and non-resident constituent entities taxable in India. Accordingly, only one master file would now be filed by the designated entity on behalf of all such constituent entities.
Country-by-country reporting
The country-by-country reporting requirements for an Indian ultimate parent entity will now apply when the consolidated group turnover is more than INR 6400 crore (USD 860 million) in the previous accounting year. The Central Board of Direct Taxes has increased the applicability threshold from the earlier threshold that corresponded to OECD as well global standards.
The new amendments are favourable to taxpayers and will save them from undue hardship of administrative filings in the case of the master file. While the guidance doesn’t clearly indicate why the country-by-country reporting thresholds have been increased, from a taxpayer perspective, an increased applicability threshold may save a number of companies from the country-by-country reporting compliance requirement.
This notification should be received favorably by taxpayers. The government is also expected to soon issue transfer pricing guidance on safe harbor issues and clarifications of the effects of COVID on transfer pricing arrangements.
Gaurav Jain
Gaurav is a Chartered Accountant having more than 15 years of post-qualification experience in the field of transfer pricing, also having worked on a wide range of inbound and outbound investment structuring.
He has extensive experience in the sectors of Natural resources, manufacturing, real estate, IT/ITES and auto ancillary. His areas of expertise include documentation, including CbCR, Master File and Local File, TP Planning and restructuring and litigation for a number of renowned multinational and Indian companies.
Gaurav has also represented various complex transfer pricing matters before the Indian tax authorities, also assisting in dispute resolution through Advance Pricing Agreements. He has also twice served as member of Committee on International Taxation, Institute of Chartered Accountants of India.
Latest posts by Gaurav Jain (see all)
- India extends applicability of transfer pricing safe harbour rules for another year - October 12, 2021
- India reduces transfer pricing filing burdens, increases reporting thresholds - April 13, 2021
- India retains transfer pricing tolerance range for 2019–20 - October 30, 2020
- Transfer pricing issues arising from the COVID-19 pandemic - April 14, 2020
- India specifies transfer pricing arm’s length tolerance range - September 17, 2019
Walker Chandiok & Associates
L 41, Connaught Circus, New Delhi
110 001, India
+91 11 4278 7070
https://www.grantthornton.in/
Priya Mani Bhutani
Priya has more than 9 years of experience in the field of transfer pricing. She holds a Master’s degree in Economics and Bachelors in Economics and Management.
She has experience in transfer pricing documentation and compliance services, including CbCR and Master File and has also assisted clients in transfer pricing assessments and planning assignments. She has serviced conglomerates from the IT/ ITeS, Auto, Natural resources, real estate and Industrial goods manufacturing and trading sectors.
Priya has represented cases before the Transfer Pricing Officers and has assisted in representation before the DRP, CIT(A) and ITAT. Her experience also includes assisting clients with litigation avoidance mechanisms such as Advance Pricing Agreement and Safe Habour.
Latest posts by Priya Mani Bhutani (see all)
- India extends applicability of transfer pricing safe harbour rules for another year - October 12, 2021
- India reduces transfer pricing filing burdens, increases reporting thresholds - April 13, 2021
- India retains transfer pricing tolerance range for 2019–20 - October 30, 2020
- Transfer pricing issues arising from the COVID-19 pandemic - April 14, 2020
- India specifies transfer pricing arm’s length tolerance range - September 17, 2019
Walker Chandiok & Associates
L 41, Connaught Circus, New Delhi
110 001, India
+91 11 4278 7070
https://www.grantthornton.in/
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