Master File – Practical considerations

MasterFile (MF) in Form3CEAA to be efiled by Indian entities of MNE Group by the due date of filing IT return i.e., 30 November. While Part A of Form has no threshold, Part B to be filed when a) consolidated group revenue >Rs 500 cr & b)aggregate value of international transactions >Rs 50 cr, or aggregate value of IP transactions >Rs 10 cr.

Most countries adopt format provided in OECD Guidelines consisting of MNE Group’s Organizational structure, Description of businesses, Intangibles, Intercompany financing activities, & Financial & tax positions. In India there are certain additional requirements & hence for mncs in india , the Global MF needs to be customized with

1. Address of all constituent entities, entities involved in IP activity, central financing entity
2. FAR analysis of entities based on 10% of Group’s revenue or assets or profits
3. Address of top 10 unrelated lenders
4. Major geographical markets

Few practical pointers to be kept in mind:

1. Consistency to be maintained between MF & localfilea)     Classification of services – Services rendered by Indian entities are classified as software development services locally while the same are treated as R&D costs in the other jurisdiction & in  MF. One should be aware as to how this needs to be presented in Global MF.
   b)     Cross charging of Intragroup service costs-Consistency in Group policy for services (management charges) to be evaluated. Whether these costs are cross charged to all countries? What is the position of Group in case of certain countries which don’t permit management charges debits(e.g) China
   c)      Pricing policy for Financing, services arrangements, concluded APAs – Alignment of pricing policy for Indian entity transactions with other entities on financing, service arrangements as well as conclusions in APA.
2. Business Group wise disclosure: In case of big business Indian conglomerates, one needs to evaluate if a business unit wise presentation of MF can be captured considering OECD Guidance relevant for that entity
3. 10% FAR criteria – How to apply the criteria in case of loss making entities for 10% of group profits?
4. Indian HQ – MF to be prepared completely by India HQ & will initially call for perusing the financials of all group entities, collation & aggregation of details would be time consuming. Clauses specify furnishing of information for ‘important’ arrangements. As this is subjective,  extent of details provided to be evaluated on materiality. In some cases, due date for MF for certain subsidiaries in other countries is before the Indian Due date & one needs to factor that
5. Onlinefiling issues – Attention to be paid to Character restrictions. No separate offline utility for form, the same to be directly filled online.