Country-by-Country Report (CbC)

In News:

• With Central Board of Direct Taxes(CBDT) notifying rules for furnishing “Country-by-Country Report” (CbC) specifying information pertaining to all large multinational enterprises (MNEs), the Finance Ministry has said that Joint Director of Income-tax (Risk Assessment)-1 has been designated as the Income-tax Authority before whom particulars of the parent entity and alternate reporting entity would be notified.

About Country-by-Country (CbC) Report

• The Organisation for Economic Cooperation and Development (OECD) has developed an Action Plan called “Base Erosion and Profit Shifting (BEPS) Action Plan 13” to ensure that a multinational enterprise would report its profit correctly where it is earned.
• The Base Erosion and Profit Shifting (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.
• This information enables an enhanced level of assessment of tax risk by both tax administrations.
• Aggregated country-by-country information relating to the global allocation of income, the taxes paid, and certain other indicators of a multi-national company.
• A list of all the constituent entities of the multi-national company operating in a particular jurisdiction and the nature of the main business activity of each constituent entity.

About BEPS

• Base erosion and profit shifting refers to the phenomenon where companies shift their profits to other tax jurisdictions, which usually have lower rates, thereby eroding the tax base in India.
• India in July 2019 ratified the international agreement to curb base erosion and profits shifting (BEPS)– Multilateral Convention to Implement Tax Treaty Related Measures.
• About the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting:
• The Convention is an outcome of the OECD / G20 BEPS Project to tackle base erosion and profit shifting through tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid.

PRELIMS QUESTION:

Q. Country-by-Country (CbC) Report which sometimes occurs in news is associated with which among the following?

a) BEPS

b) FATF

c) WTO

d) IMF

Answer to Prelims question