On March 26, 2018, India’s Ministry of Finance released a clarification on country-by-country (CbC) reporting requirements under section 286(4) of the Income Tax Act, 1961 (“ITA”). See BEPS Action 13. Section 286 of the ITA was inserted vide Finance Act, 2016, providing rules for parent or constituent entities to submit a CbC report with respect to an international group.
Section 286(2) of the ITA requires each parent entity or alternate reporting entity, resident in India, to submit a CbC report with respect to its international group on or before the due date specified under section 139(1) of the ITA for each reporting accounting year. The date for submitting the CbC report under section 286(2) for FY 2016-17 was extended to March 31, 2018 pursuant to CBDT Circular No. 26 of 2017 (dated October 25, 2017).
Section 286(4) specifies situations where the CbC report is submitted by the constituent entity of an international group, resident in India, in situations where India is unable to obtain a CbC report where either (1) the parent entity’s jurisdiction of residence does not have an agreement with India to exchange CbC reports; or (2) there has been a systemic failure with respect to this jurisdiction.
Due to the fact that constituent entities of international groups, resident in India, have expressed concern about submitting the CbC report by the due date, the Indian government has clarified that the due date of March 31, 2018 applies only to section 286(2) of the ITA (submission of CbC report by parent or alternate reporting entity) and not to section 286(4) (submission of CbC report by constituent entity).
The Finance Bill, 2018 (as passed by the Lok Sabha) proposed that the due date for constituent entities submitting the CbC report under section 286(4) be prescribed following the enactment of Finance Bill, 2018.
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