Foreign Companies Spared From India’s Global Tax Report Deadline

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Penny Sukhraj London

By Siri Bulusu

Foreign companies with Indian subsidiaries aren’t required to file country-by-country reports in India by March 31, according to a government notification released days ahead of the anticipated deadline.

The March 31 deadline for country-by-country reporting now only applies to India-headquartered multinationals, according to a March 23 notice from India’s Central Board of Direct Taxes. The notification didn’t set a new deadline for foreign companies. The change comes after foreign companies expressed “apprehensions” about filing the reports on time, the CBDT said.

“Confusion regarding the deadline for foreign multinationals was highlighted in every interaction with government officials—because we knew it was something that was coming but we had no idea when it would be due,” Surendra Prakash Singh, tax partner at Deloitte India, told Bloomberg Tax March 26.

Singh said clients are also concerned about how the Indian government will scrutinize the information provided in the country-by-county reports, and said multinationals will have to “wait and see” if the government uses the information to understand global business structures or to initiate litigation.

Country-by-country reports are the most widely adopted component of the Organization for Economic Cooperation and Development’s project to quash tax avoidance from multinationals. The reports aim to give a clear look at companies’ finances for each country in which they operate. It applies to those with annual group revenue of more than 750 million euros ( $932 million).

Confusion for Companies

Foreign multinationals became uncertain of their reporting obligations in 2017 when India introduced additional conditions relating to the multilateral competent authority agreement for automatic exchange of country-by-country reports. The amendment caused confusion over whether companies headquartered in non-compliant countries would be required to comply with country-by-country reporting in other jurisdictions.

If the country in which a company’s headquarters is located is a signatory on the agreement to automatically exchange country-by-country reports, the headquarter country will exchange the report with India, Aditya Hans, tax partner at Dhruva Advisors LLP told Bloomberg Tax in a March 26 email. A foreign-based parent company is otherwise obligated to share the report through a bilateral agreement with India.

There are special situations, Hans explained, where the country of the parent company outside of India isn’t a signatory or doesn’t have a bilateral agreement for exchanging the reports with India. In such cases, the onus to file the country-by-country report falls on the Indian subsidiary, he said.

Rahul Mitra, tax partner at KPMG India, told Bloomberg Tax in a March 23 email that the firm was among those that informed the Indian government of confusion among foreign-based multinationals operating in India.

The U.S. doesn’t have a country-by-country reporting agreement with India, and several multinational companies headquartered there were uncertain about meeting the March 31 deadline, Mitra said.

Keeping Watch

Practitioners say foreign-based multinationals are still on their toes since the final deadline is yet to be announced and it is unclear how Indian tax authorities will use the information included in reports.

Many multinational corporations believe the reports will lead to more scrutiny from tax officials and result in significant questions regarding a group’s transfer pricing and global tax policy, Amit Agarwal, a partner at Nangia & Co. LLP, told Bloomberg Tax in a March 26 email.

“The practice of issuing extension closer to last date has now become a norm rather than an exception and denotes lethargic attitude towards genuine concerns of MNCs operating in India,” Agarwal said.

To contact the reporter on this story: Siri Bulusu in New Delhi at correspondents@bloomberglaw.com

To contact the editor on this story: Penny Sukhraj at psukhraj@bloombergtax.com

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