United States

India issues draft “Master File” filing requirements


On Oct. 6, 2017, India introduced draft rules that implement Master File requirements for public comments. These rules were issued pursuant to provisions of India’s Budget 2016 which introduced 3-tier transfer pricing documentation requirements consistent with the BEPS “country-by-country” reporting guidelines issued by the OECD. While Budget 2016 required reporting consistent with the format required by the OECD’s Country-by-Country rules, the newdraft rules prescribe the format and information to be included in the Master File.

The Master File needs to be signed and submitted by the due date of the Indian tax return, i.e., Nov. 30. However, to provide sufficient time to taxpayers to comply with the requirement for the first year, the Master File for financial year 2016-17 (year ending March 31, 2017) may be submitted by March 31, 2018. The draft rules require the Master File to be prepared by a constituent entity of an international group that satisfies the following two conditions:

1.     Consolidated revenue of the group exceeds INR $5 billion (approx. USD $76 million); and

2.     The aggregate value of intercompany transactions exceed INR $500 million (approx. USD $7.6 million) or aggregate value of intercompany transactions relating to intangible property exceeds INR $100 million (approx. USD $1.5 million).

Master File - Indian Style

In typical form, India’s general approach of requiring compliance in a manner not always consistent with global rules, the Master File documentation rules also prescribe information which builds on what is already required under the OECD Master File requirements. The main areas of deviation from the OECD Master File requirements are:

1.     Organization structure: OECD requires a chart illustrating the legal/ownership structure and geographical locations of operating entities. India requires the inclusion of addresses of all operating entities.

2.     Business description and global functional analysis: While OECD requires information on the main profit drivers, products/services, a global functional analysis, etc. India requires the Master File to include the functional analysis of entities contributing at least 10 percent of the group’s revenue, assets, and profits.

3.     Intangibles: OECD requires the Master File to list all intangibles, and document the group’s strategy for intangible ownership, development, etc. while India requires the Master File to document the list of ‘all’ entities of the group (with addresses) engaged in development and management of intangibles.

4.     Intercompany financial activities: In addition to the OECD’s requirement to document how the group is financed, identify entities performing the central financing functions, and corresponding transfer pricing policies, India also requires the Master File to include the names and addresses of the top ten unrelated lenders.

Clearly, these requirements will entail additional fact finding efforts and administrative work. The Master File should also be in a prescribed form to meet Indian documentation requirements.


India is not alone in requiring additional information in its transfer pricing documentation, however, the extent and nature of these additional information requirements require taxpayers to move quickly to customize their existing Master Files or create new Master Files given the relatively lower thresholds. 


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