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India: Draft notification on CbC reporting guidance released

26 October 2017

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The OECD guidelines, which were updated in July 2017 to incorporate Action Plan 13 of the BEPS project, provide a minimum requirement of maintaining a three-tiered documentation system. This involves maintaining the master file, local file and the country-by-country (CbC) report by multinational enterprises (MNEs). The main aim of introducing the three-tiered documentation process was to bring those MNEs into the tax net that took advantage by setting-up subsidiary companies in tax havens.

Keeping in line with the above changes, the Indian tax law was amended to include the maintenance of CbC reports and the master file. On October 6 2017, the Central Board of Direct Taxes (CBDT) released a draft notification for public comments setting out the guidelines for maintaining and furnishing transfer pricing documentation in the master file and CbC report. Comments on this notification could be submitted by stakeholders to the CBDT until October 16 2017.

The draft notification provides that the master file must be maintained by an entity if the following two conditions are satisfied:

  • The consolidated revenue of the international group for the accounting year preceding the previous year exceeds INR 5 billion ($76.5 million); and
  • The aggregate value of the international transactions during the reporting year either exceeds INR 500 million, or the purchase, sale, transfer, lease or use of intangible property exceeds INR 100 million.

By providing a lower threshold for maintenance of a master file, the Indian tax administration is attempting to bring even the small MNEs into its radar.

In comparison to the OECD guidelines, the draft notification provides for certain additional requirements in relation to maintenance of the master file. Further, it also introduces thresholds on providing certain other specific details, keeping in perspective the burden on the taxpayers on maintaining such documentation.

In the detailed master file, the taxpayer will be required to disclose details such as the organisational structure, international group's business and intangibles (including cost contribution agreements, principal research service and licensing agreements), intercompany financial activities and financial and tax positions. For constituent entities that do not satisfy the aforementioned thresholds, a limited master file is required to be maintained. Further, where more than one constituent entity of an international group is resident in India, then the international group is required to designate the constituent entity who will furnish the master file.

As regards to the maintenance of a CbC report, the draft notification provides that the requirement to furnish the same will be applicable only for those entities, where the revenue of the group to which the entity belongs, is in excess of INR 55 billion.

Dharawat Rakesh Dharawat   Ajay Rotti

Rakesh Dharawat ( and Ajay Rotti (
Dhruva Advisors LLP
Tel: +91 22 6108 1000

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