Large multinational enterprises (MNEs) may be required post-Budget to furnish to Indian tax authorities information on their global incomes and taxes.
This move — a fallout of India agreeing to OECD’s Action Plan on Base Erosion and Profit Shifting (BEPS) project — will enable the Indian tax administration to secure adequate information to conduct transfer pricing risk assessments effectively. It seeks to tackle the problem of companies exploiting mismatches in tax rules to shift profits to low tax or no-tax jurisdictions.
Finance Ministry official Akhilesh Ranjan, who represented India at the BEPS deliberations, said on Thursday that India was committed to implementing the “minimum standards” of the Action Plan, including country-by-country (CbyC) reporting.
Changes will be brought to the domestic tax law in the upcoming Budget to stipulate CbyC reporting, Ranjan said at an interactive session on ‘Changing tax and regulatory landscape: A global and India perspective’, organised by professional services firm KPMG.
“India has always supported BEPS since inception. It has played a leading and intensive role in the formulation of its proposals. We will be implementing all the minimum standards, including some in the upcoming Budget,” he said.
The OECD’s objective of mandating CbyC is to ensure that all relevant tax authorities have access to the same information about an MNE group’s value chain and the resulting tax consequences.
CbyC reporting will require MNEs to provide aggregate information annually, in each jurisdiction where they do business, relating to the global allocation of income and taxes paid, together with other indicators of the location of economic activity within the MNE group.
They will also be required to furnish information about which entities do business in a particular jurisdiction and the business activities each entity engages in.
Who’s affected All MNEs with a taxable presence in India and having an annual consolidated group revenue of €750 million (or equivalent in domestic currency) or more would have to conform to CbyC reporting requirement.
Ranjan said that India will most likely adopt the same threshold as specified in the OECD’s action plan on BEPS. “We will specify the equivalent of €750 million as the threshold,” he said.