Home »Taxation » Pakistan » Exchange of information: FBR unveils reporting requirements for MNE groups

  • News Desk
  • Nov 18th, 2017
  • Comments Off on Exchange of information: FBR unveils reporting requirements for MNE groups
The Federal Board of Revenue (FBR) has issued documentation and country-by-country reporting requirements for the multinational enterprises (MNE groups) for exchange of information with other tax jurisdictions to check whether companies are involved in 'transfer pricing'. The FBR has issued SRO 1191(1)/2017 here on Friday to amend Income Tax Rules, 2002.

According to sources, tax jurisdictions would report to the FBR about the MNE groups under the said reporting requirements and FBR in return would submit information about Pakistani MNE groups to the foreign tax jurisdictions. A simple example of exchange of information by the MNE groups is that if one Pakistani multinational company is selling a product to different countries, the company would be required to submit price of a specific product being sold to different countries.

They said that every taxpayer who has entered into a transaction with its associate shall keep and maintain prescribed country-by-country report, where applicable, and keep and maintain any other information and document in respect of transaction with its associate as may be prescribed.

As per rules, every taxpayer, being a constituent entity of an MNE group and having a turnover of more than Rs 100 million, shall keep and maintain a master file. Master file as referred to in rule 27K, shall contain standardized information relevant for all MNE group members and must include chart illustrating the MNE's legal and ownership structure and geographical location of operating entities; general written description of the MNE's business including important drivers of business profit; a description of the supply chain for the group's five largest products or service offerings by turnover plus any other products or services amounting to more than five percent of group turnover.

The required description could take the form of a chart or a diagram; a list and brief description of important service arrangements between members of the MNE group, other than research and development (R&D) services, including a description of the capabilities of the principal locations providing important services and transfer pricing policies for allocating services costs and determining prices to be paid for intra-group services; (iv) a description of the main geographic markets for the group's products and services that are referred to in a brief written functional analysis describing the principal contributions to value creation by individual entities within the group ie key functions performed, important risks assumed and important assets used and a description of important business restructuring transactions, acquisitions and divestitures occurring during the fiscal year.

Under the SRO 1191(1)/2017, the purpose of exercise is to prescribe documents, information, files and reports which certain taxpayers are required to keep, maintain and furnish to the commissioner.

For every fiscal year, every constituent entity resident in Pakistan, if the constituent entity is not the ultimate parent company or the surrogate parent entity, shall furnish to the Board, on or before the date the constituent entity is required to file return under section 118, the details of the ultimate parent entity or the surrogate parent entity of the MNE group and the country or territory of which the said entities are resident: Provided that for fiscal year relating to tax year 2017, the information shall be provided by fifteenth day of February 2018. For every fiscal year, every constituent entity resident in Pakistan, if the constituent entity is the ultimate parent company or the surrogate parent entity, shall furnish to the Board, on or before the date the constituent entity is required to file return under section 118, the information whether the constituent entity is an ultimate parent entity or the surrogate parent entity: Provided that for fiscal year relating to tax year 2017, the information shall be provided by fifteenth day of February, 2018.

Every ultimate parent entity or the surrogate parent entity resident in Pakistan shall, for every reporting fiscal year in respect of the MNE group of which it is a constituent entity, furnish country-by-country report to the Board on or before the due date specified under rule 27G. (2) The Board, for every reporting fiscal year in respect of every MNE group, whose ultimate parent entity or the surrogate parent entity resident in Pakistan is required to furnish country-by-country report under sub-rule (1) or the constituent entity under rule 27E, shall transmit and exchange country-by-country reports to the jurisdictions that are parties to the competent authority agreement as defined in clause (b) of sub-rule (4) of rule 27A, on or before the due date specified under rule 27G.

A constituent entity resident in Pakistan, which is neither the ultimate parent entity nor the surrogate parent entity of an MNE group, shall file a country-by-country report to the Board with respect to the reporting fiscal year of an MNE group of which it is a constituent entity, on or before the date specified under rule 27G, if - 7 (a) the ultimate parent entity of the MNE group is not obligated to file a country-by-country report in the country or territory of which the ultimate parent entity is a resident; (b) the country or territory in which the ultimate parent entity is resident has an international agreement to which Pakistan is a party but does not have a competent authority agreement to exchange country-by-country report; or (c) there has been a systemic failure of the country or territory of which the ultimate parent entity is a resident and the said failure has been intimated by the Board to such constituent entity: Provided that where there are more than one constituent entities of the same MNE group that are resident in Pakistan and one or more of the above conditions apply, the MNE group may designate one of such constituent entities to furnish the country-by-country report to the Board with respect to any reporting fiscal year on or before the date specified under rule 27G and to intimate in writing to the Board that the filing is intended to satisfy the filing requirement of all the constituent entities of such MNE group that are resident in Pakistan, the FBR added.



the author

Top
Close
Close