This agreement ensure that all tax authority have access to similar information on multinational enterprises’ business activities and financial statement which reduce the compliance burden on their subsidiaries operating out of these countries.
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What is CbC Report?
- The Base Erosion and Profit Shifting (BEPS) Action 13 report (Transfer Pricing Documentation and Country-by-Country Reporting) provides template for MNE’s (multinational enterprises) to report annually and for each tax jurisdiction in which they do business the information set out therein. This report is called the Country-by-Country (CbC) Report.
- A CbC Report has aggregated country-by-country information relating to the global allocation of income, the taxes paid, and certain other indicators of an MNE group. It also contains a list of all the constituent entities of an MNE group operating in a particular jurisdiction and the nature of the main business activity of each such constituent entity.
To facilitate the implementation of the CbC Reporting standard, the BEPS Action 13 report includes a CbC Reporting Implementation Package which consists of
- Model legislation which could be used by countries to require the ultimate parent entity of an MNE group to file the CbC Report in its jurisdiction of residence including backup filing requirements and
- Three model Competent Authority Agreements that could be used to facilitate implementation of the exchange of CbC Reports, respectively based on the:
- Multilateral Convention on Administrative Assistance in Tax Matters
- Bilateral tax conventions
- Tax Information Exchange Agreements (TIEAs)
- India has already signed the Multilateral Competent Authority Agreement (MCAA) for exchange of CbC reports, which has enabled exchange with 62 jurisdictions.
- For implementation of these standards in India and with a view to provide information to other countries, necessary legislative changes have been made through Finance Act, 2014, by amending section 285BA of the Income-tax Act, 1961.