Country-by-Country Reporting (CbCR) is an essential aspect of international tax compliance for multinational enterprises (MNEs). In India, the Central Board of Direct Taxes (CBDT) has implemented specific guidelines aligned with the OECD’s Base Erosion and Profit Shifting (BEPS) Action 13. This article provides Chief Financial Officers (CFOs) and financial executives with a comprehensive understanding of the CbCR requirements in India, including applicability, filing procedures, and penalties for non-compliance.

Applicability of CbCR in India

Criteria for Reporting:

• MNE groups with consolidated group revenue of INR 5,500 crore or more (approximately €750 million) in the preceding fiscal year are required to submit a CbC report.
• The reporting entity is typically the ultimate parent entity of the MNE group that is a tax resident in India. In certain cases, surrogate parent entities or constituent entities may also be required to file.

Relevant Legislation:

• The primary legislative framework for CbCR in India is outlined in Section 286 of the Income-tax Act, 1961.
• Detailed rules are provided in the Income-tax Rules 1962, specifically Rule 10DB for CbCR.

Reporting Requirements

Information to be Reported:

• The CbC report must include aggregate information relating to the global allocation of income, taxes paid, taxes accrued, stated capital, accumulated earnings, number of employees, and tangible assets other than cash or cash equivalents.
• It must also contain details of all the constituent entities for which financial information is reported, indicating the jurisdiction of tax residence of each entity and the main business activities.

Form and Submission:

• MNEs must file the CbC report using Form 3CEAD.
• The report should be submitted electronically via the Income Tax e-filing portal.

Filing Deadlines

• The CbC report must be submitted within 12 months from the end of the reporting accounting year. For instance, if the accounting year ends on 31 March 2023, the report must be submitted by 31 March 2024.

Penalties for Non-Compliance

Penalties:

• Failure to file the CbC report by the deadline can result in a penalty of INR 5,000 per day up to one month and INR 15,000 per day beyond one month.
• If the failure continues beyond the date of service of notice from the tax authority, the penalty can be INR 50,000 per day from the date of service of such notice.
• Additional penalties apply for inaccurate information, including INR 500,000 for providing inaccurate particulars.

Defences:

• Entities may avoid penalties if they can demonstrate that they had a reasonable cause for the failure to comply.

Confidentiality and Use of Information

Data Protection:

• The information in the CbC report is treated as confidential and will only be exchanged with tax authorities in jurisdictions with which India has a competent authority agreement.
• The data is used to assess high-level transfer pricing and other BEPS-related risks.