INDIA Law and Practice Contributed by: Deepak Chopra, Harpreet Singh Ajmani, Rohan Khare, Pulkit Pandey and Priyam Bhatnagar, AZB & Partners
scribed and if the same is a constituent entity of an international group, it should keep and main - tain such information and document in respect of an international group as may be prescribed under the law. The Indian Transfer Pricing Regulations are largely modelled on the transfer pricing princi - ples laid down under the OECD Transfer Pricing Guidelines, including transfer pricing documen - tation requirements. Indian Transfer Pricing Reg - ulations have always required taxpayers to pre - pare transfer pricing documentation or perform a transfer pricing study annually to substantiate the arm’s length principle for their international/ specified domestic transactions. However, in 2016, keeping up with the country’s commitment to the OECD’s BEPS action plans, by insertion of Section 286 of the IT Act, the Indian govern - ment introduced the concept of three-tier trans - fer pricing documentation in India and re-aligned transfer pricing documentation requirements in India with the OECD’s recommended structure. As a result of this change, taxpayers who are part of an MNC are required to comply with the following requirements. • Local file – it refers to a transfer pricing docu - ment or a transfer pricing study which is a detailed contemporaneous document main - tained by the taxpayer to justify the arm’s length pricing of transactions, which should include various prescribed particulars such as: (a) a business overview of the group, AE and the taxpayer; (b) an overview of the industry/market in which the taxpayer operates; (c) functional, asset and risk analysis; (d) reasons for selection/rejection of the most appropriate method; (e) economic analysis; and
(f) other prescribed particulars/documents. • Master file – this was introduced in India in 2016 pursuant to the OECD’s BEPS action plans. The constituent entity should maintain and furnish the information and documents electronically in Form No 3CEAA and Form 3CEAB, if the consolidated group revenue of the international group, of which such person is a constituent entity, as reflected in the consolidated financial statement of the international group for the accounting year, exceeds INR5 billion and the aggregate value of international transactions: (a) during the accounting year of the constit - uent entity, as per the books of accounts, exceeds INR500 million; or (b) in respect of purchase, sale, transfer, lease or use of intangible property during the accounting year, as per the books of accounts, exceeds INR100 million; or • CbC reporting (CbCR) – CbCR is required to be electronically filed in Forms 3CEAC, 3CEAD and 3CEAE by the ultimate parent entity (UPE) of an MNE group that is resi - dent in India, having an annual consolidated group revenue in the immediately preced - ing accounting year of more than INR64 billion. The statutory due date for e-filing is 12 months from the end of the reporting accounting year of the UPE. The UPE can designate another group entity as an alterna - tive reporting entity for the purposes of filing CbCR. Where the UPE is outside India, in a country with which India has an agreement for the exchange of CbCR-related informa - tion, the Indian constituent entity is obliged to file a notification specifying the details of the group entity filing such CbCR. Such notifica - tion must be filed at least two months before the due date of the CbCR filing.
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