Before proceeding further I would request the reader to go through the previous blog
Proceeding further, imagine a situation wherein;
Anarkali Private Limited a company incorporated under the Indian Companies Act, is a Joint venture in which the following two are the Joint venturers
Proceeding further, imagine a situation wherein;
Anarkali Private Limited a company incorporated under the Indian Companies Act, is a Joint venture in which the following two are the Joint venturers
- Jahangir Limited, Incorporated in India (Part of Jahangir International group), having 50% stake in Anarkali Private Limited
- Akbar Limited, Incorporated in India (Part of Akbar International group), having 50% stake in Anarkali Private Limited.
Further Anarkali Private Limited has its own ventures in India.
In a given situation, let us understand the obligation of the CbC filing under the Income tax matters. Situation 1.
For simplicity, we will consider that Jahangir Limited and Akbar Limited both are the Alternate Reporting entity of the their respective group for filing CbC report u/s. 286 of the Income tax act.. In such a scenario, what will be the status of CbC reporting status for Anarkali Private Limited?
Whether Anarkali will be required to file the CbC report (Form 3CEAD), or it is only required to intimate in form 3CEAE that Jahangir Limited and Akbar Limited are the Alternate Reporting Entity and no obligation of filing CbC report will arise on Anarkali Private Limited.
In this situation,
Situation 2.
Only Jahangir Limited is the Alternate Reporting Entity in India for the entire Jahangir internationa group, whereas Akbar Limited has intimated in Form 3CEAC another ARE in some other jurisdiction (Here lets assume that Akbar Limited is not the Parent Entity and it's Parent entity is not resident in India).
https://www.oecd.org/ctp/guidance-on-the-implementation-of-country-by-country-reporting-beps-action-13.pdf
5.1 Where an entity owned and/or operated by more than one unrelated MNE Groups (e.g. a joint venture entity) is consolidated in the consolidated financial statements of one or more of these MNE Groups, including under a pro rata consolidation rule, is such an entity considered a Constituent Entity of those unrelated MNE Groups (i.e. should it be included in Table 2)? If so, where a pro rata consolidation rule is applied to the entity under the applicable accounting rules, should Table 1 include the pro rata data of the entity, and should the entity's revenue be included pro rata for the purpose of applying the 750 million Euro threshold?
The treatment of an entity for CbC reporting purposes should follow the accounting treatment. In the case of an entity which is owned and/or operated by more than one unrelated MNE Groups, the treatment of the entity for CbC reporting purposes should be determined under the accounting rules applicable to each of the unrelated MNE Groups separately. If the applicable accounting rules require an entity to be consolidated into the consolidated financial statements of an MNE Group, the entity would be considered as a Constituent Entity of that group under Article 1.4 of the Model Legislation. Accordingly, the financial data of such an entity should be reported in the CbC report of the MNE Group. This applies to entities included in the MNE Group's consolidated financial statements using either full consolidation or pro rata consolidation. If an entity is not required to be consolidated under applicable accounting rules, the entity would not be considered a Constituent Entity and, accordingly, the financial data of such an entity would not be reported in the CbC Report. Therefore an entity included in the MNE Group's consolidated financial statements under equity accounting rules would not be a constituent entity.
Where pro rata consolidation is applied to an entity in an MNE Group in preparing the group's consolidated financial statements, jurisdictions may allow a pro rata share of the entity’s total revenue to be taken into account for the purpose of applying the 750 million Euro threshold, instead of the full amount of the entity's total revenue. Jurisdictions may also allow an MNE group to include a pro rata share of the entity's financial data in its CbC report, in line with the information included in the MNE Group’s consolidated financial statements, instead of the full amount of this financial data
https://www.oecd.org/ctp/guidance-on-the-implementation-of-country-by-country-reporting-beps-action-13.pdf
5.1 Where an entity owned and/or operated by more than one unrelated MNE Groups (e.g. a joint venture entity) is consolidated in the consolidated financial statements of one or more of these MNE Groups, including under a pro rata consolidation rule, is such an entity considered a Constituent Entity of those unrelated MNE Groups (i.e. should it be included in Table 2)? If so, where a pro rata consolidation rule is applied to the entity under the applicable accounting rules, should Table 1 include the pro rata data of the entity, and should the entity's revenue be included pro rata for the purpose of applying the 750 million Euro threshold?
The treatment of an entity for CbC reporting purposes should follow the accounting treatment. In the case of an entity which is owned and/or operated by more than one unrelated MNE Groups, the treatment of the entity for CbC reporting purposes should be determined under the accounting rules applicable to each of the unrelated MNE Groups separately. If the applicable accounting rules require an entity to be consolidated into the consolidated financial statements of an MNE Group, the entity would be considered as a Constituent Entity of that group under Article 1.4 of the Model Legislation. Accordingly, the financial data of such an entity should be reported in the CbC report of the MNE Group. This applies to entities included in the MNE Group's consolidated financial statements using either full consolidation or pro rata consolidation. If an entity is not required to be consolidated under applicable accounting rules, the entity would not be considered a Constituent Entity and, accordingly, the financial data of such an entity would not be reported in the CbC Report. Therefore an entity included in the MNE Group's consolidated financial statements under equity accounting rules would not be a constituent entity.
Where pro rata consolidation is applied to an entity in an MNE Group in preparing the group's consolidated financial statements, jurisdictions may allow a pro rata share of the entity’s total revenue to be taken into account for the purpose of applying the 750 million Euro threshold, instead of the full amount of the entity's total revenue. Jurisdictions may also allow an MNE group to include a pro rata share of the entity's financial data in its CbC report, in line with the information included in the MNE Group’s consolidated financial statements, instead of the full amount of this financial data
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