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Country-by-country (CbC) reports

Topics Covered:

  1. Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.

 

Country-by-country (CbC) reports

 

What to study?

For Prelims and Mains: What are CbC reports- brief background, need and their significance.

 

Context: India and the US can now exchange country-by-country (CbC) reports filed by the ultimate parent corporations based in either of the countries.

 

Significance and impact:

  1. This will reduce the compliance burden on their subsidiaries operating out of these countries.
  2. The agreement would enable both the countries to exchange CbC reports filed by the ultimate parent entities of international groups in the respective jurisdictions, pertaining to the financial years commencing on or after January 1, 2016.

 

Provisions wrt CbC reports:

The Income Tax Act requires Indian subsidiaries of multinational companies to provide details of key financial statements from other jurisdictions where they operate. This provides the IT department with better operational view of such companies, primarily with regards to revenue and income tax paid.

The provision was a part of the base erosion and profit shifting action plan, and later incorporated in IT Act also.

 

BEPS Action 13 report:

The BEPS Action 13 report (Transfer Pricing Documentation and Country-by-Country Reporting) provides a template for multinational enterprises (MNEs) 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.