Foreign Policy Watch: India-United States

India, US to sign pact for exchange of country-by-country reports


Mains Paper 2: IR| Effect of policies and politics of developed and developing countries on India’s interests, Indian Diaspora.

From UPSC perspective, the following things are important:

Prelims level: CBC reports

Mains level: India-US trade relations


  • India and the US can now exchange country-by-country (CbC) reports filed by the ultimate parent corporations based in either of the countries.
  • This will reduce the compliance burden on their subsidiaries operating out of these countries.

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 objective of mandating CbC is to ensure that all relevant tax authorities have access to the same information about an MNC’s value chain and the resulting tax consequences.
  • The provision was a part of the base erosion and profit shifting action plan, and later incorporated in IT Act also.

Why file such reports?

As per the Income-tax Act, a constituent entity of an international group, resident in India, other than a parent entity or an alternate reporting entity of an international group, resident in India, shall furnish the Country-by-Country (CbC) Report for a accounting year within the period as may be prescribed, if the parent entity of the said International Group is resident of a country or territory:

  • where the parent entity is not obligated to file the CbC Report
  • with which India does not have an agreement providing for exchange of the CbC Report OR
  • where there has been a systemic failure of the country or territory and the said failure has been intimated by the prescribed authority to such constituent entity

Why this move?

  • With this, Indian constituent entities of international groups headquartered in USA, who have already filed CbC Reports in the USA, would not be required to do local filing of the CbC Reports of their international groups in India.
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