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While the Finance Bill has outlined reporting requirements for Cubic report, the detailed rules for master file
and local file would be prescribed in due course.
B. Country-by-Country (Cubic) report (proposed Section 286)
The Cubic report has to be submitted by parent entity of an international group to the prescribed
authority in its country of residence. While the format of the Cubic report is to be prescribed, the broad level
content has been provided in the new provision and is reproduced below (proposed section 286(3)):
"(3)For the purposes of sub-section(2), there port in respect of an international group shall
include,
(a) the aggregate information in respect of the amount of revenue, profit or loss before income-tax, amount
of income-tax paid, amount of income-tax accrued, stated capital, accumulated earnings, number of
employees and tangible assets not being cash or cash equivalents, with regard to each country or territory
in which the group operates;
(b) the details of each constituent entity of the group including the country or territory in which such
constituent entity is incorporated or organised or established and the country or territory where it is
resident;
(c) the nature and details of the main business activity or activities of each constituent entity; and
(d) any other information as may be prescribed."
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The above seems to be broadly in line with the Cubic content provided by the OECD BEPS report, captured
hereunder:
The Cubic reporting is required for an international group having an Indian parent, for the previous year
2016-17, to apply only if the consolidated revenue of the international group in previous year 2015-16
exceeds the prescribed threshold(as per the Memorandum to the Finance Bill 2016, the threshold is indicated
to be INR 5395 crore (Euro 750 million)).
If applicable, then the Indian parent entity will be required to furnish the Cubic report in respect of the
group on or before the due date of furnishing of return of income for the relevant Financial Year;
An Indian entity, having a parent entity resident outside India, will be required to provide information
regarding the country or territory of residence of the parent entity to the prescribed authority on or before
the prescribed date.
An entity in India belonging to an international group is required to furnish Cubic report to the prescribed
authority if the parent entity of the group is resident:
- in a country with which India does not have an arrangement for exchange of the Cubic report; or
- such country is not exchanging information with India even though there is an agreement; and
- this fact has been intimated to the entity by the prescribed authority;
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For non-furnishing of the Cubic report by an entity which is obligated to furnish it, a graded penalty
structure would apply which include Rs. 5,000 per day (if default does not exceed one month) and Rs.
15,000 per day (for the period exceeding one month)
Further, for any default that continues even after service of order levying penalty, as above, then the
penalty for any continuing default will be Rs 50,000/- per day
In case of non-submission of information called by prescribed authority in relation to Cubic report in a
timely manner, a penalty of Rs. 5,000/- per day applies. Similar to the above, if default continues even
after service of penalty order, then penalty of Rs.50,000/- per day applies for default beyond date of
service of penalty order;
If the entity has provided any inaccurate information in the Cubic report, penalty of Rs 500,000/applies subject to certain conditions
C. Master File (proposed Section 92D(4))
The information and document in relation to master file will be furnished to the prescribed authority
within such period as may be prescribed and the manner of furnishing may also be provided in the
rules;
However, as appearing in the Memorandum to the Finance Bill 2016, it seems that the content of the
Master File would be in line with the OECD BEPS report and may contain the overview of the MNE
group's business, including the nature of its global business operations, its overall transfer pricing
policies, and its global allocation of income and economic activity.
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