MNCs may have to disclose details of HQ operations to I-T dept

Multinational companies operating in India will soon have to disclose details of their operations at the country of residence and their revenue income to the Income Tax authorities.

The Budget for 2015-16 may contain provisions relating to the Global Base Erosion and Profit Shifting (BEPS) rules, which are aimed at collecting a fair share of taxes from multinationals operating in different tax jurisdictions, a source said.

"Some provisions related to BEPS are likely to be included in the Budget. These may include the MNCs providing their details of operations at their headquarters or the country from where they are operating their business in India," the source added.

The move would help in assessment of future tax liability of subsidiaries of MNCs in India as the details would help bring in clarity in transfer pricing. International investors have long been clamouring for clarity in transfer pricing regime in India.

"The new clause in the I-T Act would be in keeping with the OECD norms and will bring in clarity for taxation of MNC subsidiaries. This will address the G20 concern on tax avoidance," the source added.

The leaders of 20 developing and developed countries at their summit in Brisbane in November 2014 had endorsed the action plan to tackle BEPS, to make sure companies pay their fair share of tax.

The BEPS initiative would ensure that tax is paid where profits are made. "Profits should be taxed where economic activities deriving the profits are performed and where value is created," the communique issued after G20 meeting had said.

The G20 action plan on BEPS is expected to be finalised by 2015. Multinational companies use a wide range of cross border tax planning techniques that result in little or tax liability and such results are referred to as 'Base Erosion and Profit Shifting'.

India has been at the forefront in raising the issues concerning tax avoidance and automatic exchange of information with a view to curbing tax evasion.

The G20 countries include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russian Federation, Saudi Arabia, South Africa, Turkey, United Kingdom, United States and the European Union.