1 9 January 2019 Global Tax Alert News from Transfer Pricing Indian Tax Administration announces due date for secondary filing under Country-by-Country Reporting regulations Executive summary NEW! EY Tax News Update: India’s amended the Indian Country-by-Country (CbC) Finance Act, 2018 Global Edition reporting (CbCR) regulations retroactively from the financial year (FY) starting 1 April 2016. Accordingly, the time limit for furnishing the CbC report was EY’s new Tax News Update: Global extended to 12 months from the end of the reporting accounting year (i.e., Edition is a free, personalized email India fiscal year ending 31 March) in respect of: (A) the Indian resident Ultimate subscription service that allows Parent Entity (UPE); or (B) the Indian resident Alternate Reporting Entity (ARE)/ you to receive EY Global Tax Alerts, Surrogate Parent Entity (SPE). However, in situations where a CbC report filing newsletters, events, and thought obligation was applicable to an Indian resident constituent entity (CE) of a leadership published across all areas foreign headquartered multinational enterprise (MNE) group (“secondary filing” of tax. Access more information requirement), the amended law provided that the due date would be prescribed . here about the tool and registration by the Indian Tax Administration (ITA) at a later date. On 18 December 2018, the ITA through a notification, prescribed that the due EY Global Tax Also available is our dates for “secondary filing” would be 12 months from the end of the reporting Alert Library on ey.com. accounting year of the MNE group. However, for all reporting accounting years up to 28 February 2018, the due date has been extended to 31 March 2019. In the case of systemic failure (where a country not exchanging CbC report with India even though there is an exchange agreement in place), the notification provides that the CbC report should be filed in India within six months from the end of the month in which such systemic failure has been communicated to the CE by the ITA.
2 2 Transfer Pricing Global Tax Alert It may be noted that India is a signatory to the CbCR Taxpayers who are subject to CbCR requirements Multilateral Competent Authority Agreement (MCAA) and in India has activated most of the exchange relationships. Further, Under the Indian Income Tax Law (ITL), the CbC report filing India has currently not identified any jurisdiction as falling requirements would arise in the case of the following entities: under the category of systemic failure. However, India Primary filing requirement – The UPE or the ARE/SPE of A. currently does not have an exchange relationship with an MNE group which is resident in India jurisdictions including the British Virgin Islands, Israel, Saudi Secondary filing requirement – The Indian resident CE B. Arabia, Sri Lanka, Taiwan, Thailand, Turkey, the United of a foreign MNE group and UPE of such MNE group is Arab Emirates, the United States (US), and Vietnam, among resident in a country/tax jurisdiction that meets one of others. Hence, UPEs resident in these jurisdictions could the following: potentially have a secondary filing requirement in India, The UPE is not obligated to file a CbC report (i) unless the exchange relationship is activated by 31 March 1 2019. Local filing by a CE in India is not triggered if the UPE for the India does not have an arrangement (ii) has appointed an ARE/SPE which has furnished the report exchange of CbCR in the country of residence of the ARE/SPE and none of (iii) The country/tax jurisdiction is not exchanging the above conditions apply to the country of residence of information with India even though there is the ARE. an agreement for exchange and this fact has been communicated to the CE by the Indian Tax The Indian resident CEs who are obligated to undertake Administration “secondary filings” need to review the implications and monitor developments to determine their filing obligations. However, the ITL also provides that if an MNE group, has a Specifically, MNE groups that have a UPE resident in the UPE which is not resident in India, and has designated an US may need to evaluate whether their Indian resident CEs alternate entity (i.e., ARE/SPE) for filing its report with the would have a CbC report filing obligation in India by the tax jurisdiction in which such ARE/SPE is resident, then the prescribed due date depending on the status of Bilateral entities of such MNE group operating in India would not be Competent Authority Agreement (BCAA) for exchange of required to furnish a CbC report if the same can be obtained CbC reports between India and the US. under the agreement of exchange of CbC reports by the ITA pursuant to government-to-government mechanisms This Alert provides an overview of the Indian CbCR under the Multilateral Convention on Mutual Administrative regulations specifically with respect to the “secondary Assistance in Tax Matters, bilateral tax treaties or Tax filings” requirements. Information Exchange Agreements (TIEAs). Prescribed due date for undertaking “secondary Detailed discussion filing” in India by Indian CEs Background Under the Indian CbCR regulations, for the cases covered under A above, the due date shall be 12 months from the Finance Act, 2018 Under the amended law (pursuant to the ), end of the reporting accounting year of the Indian UPE or the deadline for furnishing a CbC report by a UPE or an ARE/ ARE/SPE. Accordingly, the due date for filing a CbC report by SPE, resident in India was within 12 months from the end of such entities in India would be determined from a 31 March the reporting accounting year (i.e., 31 March). However, in or year ending. Whereas, for the cases covered under B(i) situations where a CbC report filing obligation was applicable B(ii) above, the notification has prescribed the due date to be to an Indian resident CE of an MNE group, (whose UPE/ARE is 12 months from the end of the reporting accounting year of not resident in India), the amended law provided that the due the MNE group. Further, if an Indian CE would be required to date would be separately prescribed by the ITA. Accordingly, file locally due to any systemic failure (cases covered under the ITA, through a notification dated 18 December 2018 B(iii) above), the notification has provided that the CbC report (issued through circular dated 26 December 2018), has should be filed in India within six months from the end of the prescribed the due dates for undertaking local filing by month in which such systemic failure has been communicated such CEs in India. to the CE.
3 Global Tax Alert 3 Transfer Pricing However, given that the notification was issued towards the end of the deadline, it posed some practical challenges/issues and also, had unintended consequences specifically for UPEs following a “calendar year” as the reporting year or where the reporting year ended prior to December. Therefore, following the representations from various industry stakeholders, on 26 December 2018, the ITA, through a circular, has extended the due date for undertaking the “secondary filing” of CbC or B(ii) above in respect of all reporting accounting years up to 28 February reports by Indian resident CEs who fall under B(i) 2018. There is no change in the due date for Indian CEs who fall under B(iii) above. The details of which are provided below. Circumstances in which Indian CE would be Prescribed due date required to undertake “secondary filings” B. (i) The UPE of the foreign MNE group is not 31 March 2019 In respect of all reporting accounting years up to 28 February 2018 obligated to file a CbC report in the home jurisdiction. All reporting accounting years ending 12 months from the end of the reporting accounting on or after 1 March 2018 Some countries/territories which fall under year of such MNE group. this include Kuwait, Namibia, and Philippines, among others. The UPE of foreign MNE group is resident in 31 March 2019 B. (ii) In respect of all reporting accounting a country/tax jurisdiction with which India years up to 28 February 2018 does not have an arrangement for exchange All reporting accounting years ending 12 months from the end of of CbCR on or after 1 March 2018 the reporting accounting year of such MNE group. Some countries/ territories which fall under this include the British Virgin Islands, Israel, Saudi Arabia, Sri Lanka, Taiwan, Thailand, Turkey, United Arab Emirates, US, and Vietnam, among others. The UPE of the foreign MNE group is Six months from the end of the month in which such systemic failure B. (iii) resident in a country/tax jurisdiction has been communicated to the CE by the ITA that is not exchanging information with India even though there is an agreement (“systemic failure”) and this fact has been communicated to the CE by the Indian Tax Administration Accordingly, for example, if the reporting accounting year of the MNE group ends on 30 September 2017 or 31 December 2017, the due date for undertaking local filing would be 31 March 2019 assuming the above conditions under either B(i) or B(ii) are met. However, it may be noted that if the accounting year followed by a foreign MNE group ends any time after 28 February 2018 but before 31 March 2018 (for example, the last Friday of every March), then the time limit for “secondary filing” under B(i) B(ii) shall be computed based on the MNE group reporting accounting year ending. For such cases, the or extension up to 31 March 2019 would not be applicable. For example, if a foreign MNE group’s reporting accounting year ends on last Friday of March (i.e., 30 March 2018), then the due date for undertaking local filing would be 30 March 2019 for cases covered under B(i) or B(ii) above. CbC report filing requirements According to the Indian CbCR regulations, those Indian CEs satisfying the conditions for “secondary filings” should furnish the CbC report to the Director General of Income Tax (Risk Assessment) for every reporting accounting year. Such filing needs to be done in Form 3CEAD by the due date as prescribed above. In the case where there are more than one CEs of an MNE group resident in India, then Form 3CEAD may be furnished by a designated CE by filing a separate notification in relation to such designation by the MNE group to furnish the said report with Director General of Income Tax (Risk Assessment) in Form 3CEAE.
4 4 Global Tax Alert Transfer Pricing Filing of the CbC report in Form 3CEAD and notification in Form 3CEAE would be done electronically. These Forms should be verified and signed by the person who is competent to verify the income tax return of the CE under the ITL. Monetary penalty for non-compliance Under the ITL, monetary penalties are applicable if the reporting entity fails to furnish or furnishes an inaccurate CbC report within the due date unless the taxpayer is able demonstrate “reasonable cause” for such non-compliance. The prescribed sum of penalties are as follows: Event Penalty • Non-filing of CbC report by Indian resident parent INR5,000 (approx. US$70) per day up to one month company or alternate resident company • INR15,000 (approx. US$210) per day beyond one month INR50,000 (approx. US$710) per day for continuing default after • service of notice Not furnishing the information called for by the ITA • INR5,000 (approx. US$70) per day up to service of penalty order within the given time limit • INR50,000 (approx. US$710) per day for default beyond date of service of penalty order Furnishing inaccurate details or non-filing of NR500,000 (approx. US$7,140) • corrected report within 15 days Implications Indian resident CEs who have their UPE resident in jurisdictions falling under B(i) B(ii) would be impacted and would need to or review the implications. It may be noted that since the Finance Act, 2018 amended the CbCR due dates retrospectively from 1 April 2016, the notification would have implications for financial years [viz. relevant reporting accounting years of the MNE group] which have already passed. The Indian CEs who are impacted may need to consider whether their first CbCR obligation in India is required only for reporting accounting periods starting on or after 1 April 2016 i.e., the effective date of the CbCR provisions in India. While there is an extended time line for making “secondary filings” in India for such Indian resident CEs meeting the prescribed conditions, the MNE groups that have a UPE resident in the US would specifically need to monitor the developments around the India-US BCAA (which is currently under negotiation) to see as to whether there would be any requirement to undertake “secondary filing” by their Indian CEs on or before 31 March 2019 or not. Endnote 1. Competent authority agreement for exchange of CbC reports based on existing international agreements such as the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, bilateral tax treaties and Tax Information Exchange Agreements.
5 Global Tax Alert 5 Transfer Pricing For additional information with respect to this Alert, please contact the following: Ernst & Young LLP (India), National Transfer Pricing Leader, New Delhi • Vijay Iyer [email protected] Ernst & Young LLP, Indian Tax Desk, New York • Sameep Uchil [email protected] Ernst & Young LLP, Indian Tax Desk, Chicago • Roshan Samuel [email protected] Ernst & Young LLP, Indian Tax Desk, San Jose Archit Shah [email protected] • Ernst & Young Solutions LLP, Indian Tax Desk, Singapore • Gagan Malik [email protected] Ernst & Young LLP (United Kingdom), Indian Tax Desk, London • Amit B Jain [email protected]
6 EY | Assurance | Tax | Transactions | Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. Transfer Pricing Group © 2019 EYGM Limited. All Rights Reserved. EYG no. 012732-18Gbl 1508-1600216 NY ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com
Does Public Country-by-Country Reporting Deter Tax Avoidance and Income-Shifting? Evidence from Capital Requirements Directive IV Preetika Joshi Schulich School of Business York University [email protected]More info »
Country-by-Country Reporting The FAQs September 2016More info »
DEPAR T MENT THE NAVY OF ADQ UARTE UNI T ED ST ATE S MAR INE CORPS HE RS RINE COR N PS PENT 3000 MA AGO 20350-3000 NGTON, HI D.C. W AS 7E 00 .1 12 MCO 465 c AUG 0 8 013 2 ORDER 1200.17E MARINE CORPS C...More info »
U.S. DEPARTMENT OF TRANSPORTATION ORDER FEDERAL AVIATION ADMINISTRATION 7400.11C JO Air Traffic Organization Policy August 13, 2018 SUBJ: Airspace Designations and Reporting Points . This O rder, publ...More info »
H. R. 5515 One Hundred Fifteenth Congress of the United States of America AT THE SECOND SESSION Begun and held at the City of Washington on Wednesday, the third day of January, two thousand and eighte...More info »