What is Country by Country Reporting? by CA. Harsh Mathur

International Taxation

-Country by Country Reporting- Transfer Pricing

Article by: CA. Harsh Mathur


Country by Country Reporting

What is Country by Country Reporting?

The Base Erosion and Profit Shifting (BEPS) Action Plan adopted by the OECD and G20 countries in 2013 recognized that enhancing transparency for tax administrations by providing them with adequate information to assess high-level transfer pricing and other BEPS-related risks is a crucial aspect for tackling the BEPS problem.

The BEPS Action 13 report (Transfer Pricing Documentation and Country-by-Country Reporting) provides a template for multinational enterprises (MNEs) to report annually and for each tax jurisdiction in which they do business the information set out therein. This report is called the Country-by-Country (CbC) Report.

To accomplish this, a competent authority will automatically exchange CbC reports prepared by multinational enterprise (MNE) groups with a reporting entity in its jurisdiction with partner jurisdiction competent authorities in all jurisdictions in which the MNE group operates, provided that a legal instrument allowing for the automatic exchange of information (e.g. double taxation convention (DTC) or tax information exchange agreement (TIEA) is in force and a competent authority arrangement (CAA) for the exchange of CbC reports is operative with such second-mentioned jurisdictions.


  • Intended to promote greater transparency for tax administrations by providing them with relevant and reliable information to conduct high-level transfer pricing risk assessments.
  • To provide information to help curb the tax evasion and profit shifting by the MNEs.

Requirements under Income Tax Act 1961

India has been one of the active members of the Base Erosion and Profit Shifting initiative. To this effect, India introduced core elements of the Country-by-Country reporting requirement and the concept of Master File in the Indian Income Tax Act, 1961 through Finance Act 2016, effective from 1 April 2016. Section 286 has been inserted under the Act in order to make CbC Reporting mandatory for certain category of MNEs.

In context of transfer pricing, BEPS report has suggested three-tier documentation structure which is as under:

A. Master File  [Section 92D and Rule 10DA]

B. Country by Country Report [Section 286 and Rule 10DB]

C. Local File [Section 92D and Rule 10D

Amendment under Finance Act 2018

The version of the Finance Bill 2018 passed by the lower house now provides that the Indian constituent entity would be required to file the CbC report within the prescribed period. The implication of this change is that for jurisdictions (of the parent company) with which India does not currently have an agreement for the exchange of information or jurisdictions where there is no obligation to file a CbC report, the Indian constituent entity would now have an extension of time with regard to filing the CbC report domestically (in India). For instance, Indian constituent entities of U.S. headquartered multinational enterprises (MNEs) would not be required to file a CbC report in India on 31 March 2018 (as previously understood).

CBDT vide notification dated 18th December 2018 has defined the prescribed time to be twelve months from the end of reporting accounting year.

Another change concerns the definition of the term "agreement" for purposes of the exchange of information relating to CbC reports. This term has been amended so that it refers only to agreements for the exchange of CbC reports filed by the Indian parent company or the Indian "alternative reporting entity." CbC reports filed domestically by Indian constituent entities of foreign parent companies, thus, would be excluded. The implication of this change is that in situations when the Indian constituent entity has filed the CbC report in India, that CbC report could not be exchanged by the Indian authorities with tax authorities of other jurisdictions

The final rules also propose that where there are multiple Indian constituent entities of a foreign IG (that is required to file the CbC report in India under the above circumstances), the foreign IG can designate one constituent entity in India to furnish the CbC report in India. The IG would be required to intimate the designated entity to the Director General of Income-tax (Risk Assessment)

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