BEPS Action 13: Master File and Local File Requirements

India adopted the OECD's BEPS Action 13 framework through amendments to the Income-tax Act and Income-tax Rules in 2016 and 2017. The framework requires three tiers of documentation for multinational enterprise (MNE) groups operating in India.

The three tiers

1. Master File — describes the MNE group as a whole: organisational structure, business description, intangibles, financial activities and consolidated financial position.
2. Local File — describes the local entity's controlled transactions, including functional analysis, comparability and arm's-length determination.
3. Country-by-Country Report (CbCR) — provides aggregated income, tax and economic activity data by tax jurisdiction.

Master File — applicability and content

Under section 92D and Rule 10DA, the Master File is required where the consolidated revenue of the international group exceeds ₹500 crore in the accounting year, and either:

• Aggregate value of international transactions exceeds ₹50 crore, or
• Value of intangible-property-related international transactions exceeds ₹10 crore.

The Master File is filed in Form 3CEAA within the prescribed due date. Part A is a designated entity intimation; Part B is the substantive Master File content.

Local File requirements

The Local File requirements are integrated into the contemporaneous documentation requirement under section 92D(1). The substantive content covers:

• Functional, asset and risk (FAR) analysis
• Description of controlled transactions and TP method selection
• Comparable benchmarking studies under TNMM, CUP, RPM, Cost-plus or PSM
• Arm's-length range computation and analysis

Country-by-Country Report

CbCR applies to MNE groups with consolidated revenue exceeding €750 million (or its INR equivalent — currently approximately ₹6,400 crore). The Indian constituent entity files Form 3CEAD (notification) and the parent or surrogate parent files Form 3CEAB (the report itself), in line with section 286.

Filing dates

The dates flow from the assessment year:

• Form 3CEAA (Master File): on or before the due date for return of income under section 139(1)
• Form 3CEAC (notification of CbCR filing): at least 2 months before the due date for return of income
• Form 3CEAD (CbCR): within 12 months of the end of the reporting accounting year

Practical considerations

Many groups underestimate the lead time required for Master File preparation, particularly the consolidation of intangibles disclosures across the group. Common issues include:

• Coordinating with the global TP team on Master File content — Indian fiscal year end may not align with the parent's reporting calendar
• Reconciling CbCR data with Indian Local File — discrepancies attract scrutiny
• Managing the designated entity intimation where multiple Indian constituent entities exist in the group

Documentation should be initiated well before the financial year-end to ensure quality and to provide adequate time for review by the engagement partner before filing.