Form 3CEF Notification

OFFLINE TO ONLINE – FORM NO. 3CEF – ANNUAL COMPLIANCE REPORT ON ADVANCE PRICING AGREEMENT

On 16th July, 2022, the Directorate of Income Tax (Systems), New Delhi, has issued the notification where it has been prescribed that Form No. 3CEF which is the Annual Compliance Report (ACR) on Advance Pricing agreement (APA) is mandatorily required to be filed electronically. This comes into effect immediately. The e-filing portal is expected to be updated with the electronic Form 3CEF.

What does it mean for Taxpayers who have an APA in place?

Every Tax payer who has concluded an APA will need to file the ACR in Form No. 3CEF for each of the covered years of the APA. This is filed to intimate to the APA authorities that the Tax payer has complied with the terms of the APA for the covered international transactions. As part of the annexure to the Form, the Tax payer also provides the relevant supporting documents as agreed in the APA.

From the inception of the APA regime, all the forms were required to be filed in physical form. In the case of Form No. 3CEF, the Form and relevant annexures were required to be submitted in quadruplicate with the APA office within 30 days of filing the Income tax return or within ninety days of entering into an agreement, whichever is later.

Perhaps with the online filing of Form 3CEF, one of the laborious procedural aspects in the APA has been brought into the digital mode. This is a welcome move as it stops the physical movement of files to various stakeholders – Competent authority in India, CIT of the relevant tax payer and the TPO and also protects the confidential information of the tax payer. Only the relevant officer handling the Tax payer’s case would be able to view the details with a click of a button. The information gathered in the online utility would facilitate better data analytics and can be used to provide insights to the APA authorities on various quantitative parameters within an industry peer group. This will also provide a tracking mechanism to the APA authorities whether these Forms are actually filed within the prescribed due dates.

One needs to wait and watch whether this is a precursor for an online APA application filing. Several countries including US, UK, Japan, Australia have already implemented e-filing of APA Applications and possible that some of the best practices could be brought into the Indian APA regime.