India-US sign pact for exchange of reports to check tax evasion by MNCs

India and the US Wednesday signed an Inter-Governmental Agreement for exchange of Country-by-Country (CbC) reports of multinational companies regarding income allocation and taxes paid to help check cross-border tax evasion. This agreement for exchange of CbC reports, along with the Bilateral Competent Authority Arrangement, will enable both the countries to automatically exchange CbC reports filed by the ultimate parent entities of multinational enterprises (MNEs) in the respective jurisdictions, pertaining to the years commencing on or after January 1, 2016, a Finance Ministry statement said.

It would also obviate the need for Indian subsidiary companies of US multinationals to do local filing of the CbC reports, thereby reducing the compliance burden. The agreement was signed by Central Board of Direct Taxes Chairman P C Mody and US' ambassador to India Kenneth Juster.

India has already signed the Multilateral Competent Authority Agreement (MCAA) for exchange of CbC reports, which has enabled exchange with 62 jurisdictions. Filing of CbC reports by the parent entity of an MNC group to the prescribed authority in the jurisdiction in which it is a resident and exchange of such reports between countries are the minimum standards required under the Action 13 Report of OECD/G20 BEPS (Base Erosion and Profit Shifting) project.

A CbC report aggregates country-by-country information relating to the global allocation of income, taxes paid, and certain other indicators of an MNC. It also contains a list of all the group companies operating in a particular jurisdiction and the nature of the main business activity of each such constituent entity.

MNEs having global consolidated revenue of 750 million Euros or more (or a local currency equivalent) in a year are required to file CbC reports in their parent entity's jurisdiction. The Indian rupee equivalent of 750 million Euros has been prescribed as Rs 5,500 crore in Indian rules.

"This information will enable an enhanced level of assessment of tax risk by both tax administrations," the statement added.