US MNCs asked to submit financial information in 10 days

The Indian government has asked US companies with local subsidiaries to submit details of their global revenue, profit and sales to the taxman by December 31.

The directive has put companies including Google, Facebook, Dell and IBM in a spot because of the short notice and taken them by surprise because India and the US were still negotiating how this data would be shared.

The information has to be submitted to the tax authorities as per principles adopted at the multilateral Organisation for Economic Cooperation and Development (OECD) under BEPS (Base Erosion and Profit Shifting) to prevent tax evasion.


The BEPS Action Plan adopted by the OECD and G20 countries in 2013 recognised that enhancing transparency for tax administrations by providing them with adequate information is crucial to assess high-level transfer pricing and other related risks.

Most multinational companies in India are required to submit these details, except those based in countries that are not part of the OECD. Companies have to report the details annually and for each tax jurisdiction in which they do business. This report is called the Country-by-Country (CbC) Report.

The period for furnishing the report by the constituent entity is 12 months from the end of the reporting accounting year, the Central Bureau of Direct Taxes said in a circular issued on December 18. Most US companies end their financial year in December.

“The government notification means that CbC report filing for many companies would need to be completed by the end of this calendar year… such short notice has led to a lot of anxiety,” said Kunj Vaidya, transfer pricing leader at Price Waterhouse & Co. LLP, India. “Most MNCs would be closing for year-end holidays. Besides, reconciliation issues may also need to be addressed between the formats in which the global parent may have prepared the CbC report vis-à-vis the Indian format.”

As of November 9, the US was yet to sign the agreement on the exchange of country-by-country reports, according to data on the OECD website. India, which is among 75 nations that have signed up, and the US are negotiating how such reports would be shared and many tax experts and companies assumed the process would start only after an accord was finalised.

However, the recent CBDT notification asks all multinationals, including those based in the US, to provide these details.

“As per the earlier regulation, Indian subsidiaries were required to furnish CbC reports for the financial year 16/17 by March 31, 2018, but countries that didn’t have CbC agreement with India were exempted. The US was one of the largest trade partners without an agreement. The recent notification essentially means that American companies should file CbC reports for the period ending December 31, 2017, within the next 10 days,” Ajay Rotti, a partner at Dhruva Advisors, said on Friday.

Under BEPS, multinationals are required to declare details of revenue earned, taxes paid, employees hired and the supply chain management in every country in which they operate. Most multinationals, including European, Japanese, Korean and Chinese companies, have submitted these details to the Indian tax authorities.

BEPS is meant to curb aggressive tax planning. Senior revenue officials with the Income Tax Department said several multinationals have moved Indian employees to overseas locations or hired people in Switzerland and Ireland. If it is found that a location is being used only for tax arbitrage, other countries can raise objections and raise tax demands from their domestic subsidiaries.

Officials point out that some Indian companies with global operations are also cautious as BEPS could result in additional tax demands in India or abroad.

Apart from missing the December deadline, multinationals worry about the confidentiality of sharing such data.

“We are currently taking a legal opinion as to whether sharing such details would have any implication. If leaked, such data could provide advantage to our competitors,” said the CFO of a major new world technology company.