12 April 2018

CBDT draft notification - proposed amendment to advance ruling rules and forms in line with BEPS Action Plan 5

Under Base Erosion and Profit Shifting [BEPS] Action Plan 5, Permanent Establishment (PE) related rulings (by Authority for Advance Rulings) are required to be exchanged not only with the countries of residence of all related parties with whom taxpayer enters into transaction but also with the country of residence of the immediate parent company and the ultimate parent company. In order to implement the recommendations made under BEPS Action Plan 5 and to bring greater transparency in cross-national transactions, Form 34C and 34D (Forms for advance rulings) are required to be modified so that details such as name, address, and country of the residence of non-resident's immediate parent company or ultimate parent company are captured at application stage itself. The Finance Act, 2017 amended the definition of the term ‘applicant’ for the purpose of Advance Rulings under the Income-tax Act, 1961 (the Act)1 . However, no consequential amendments were made in Rule 44E of the Income-tax Rules, 1962 (the Rules) [relating to application for obtaining an advance ruling] and respective Forms to bring them in harmony with the amendment to the Act. Recently, Central Board of Direct Taxes (CBDT) has issued draft notification 2 proposing an amendment to Rule 44E of the Rules and Forms 34C, 34D and 34DA. Key changes are as follows:

Rule 44E of the Rules The draft notification proposed corresponding amendment in Rule 44E thereby to align with the amendment made by the Finance Act 2017. _______________ 1

Substituted clause (b) of Section 245N of the Act CBDT draft notification (F.No.370142/34/2016-TPL) (Part), dated 10 April 2018 2

Form No 34C

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It is required to provide the taxpayer registration number/taxpayer identification number/functional equivalent/any unique number used for identification by the government of that country/specified territory of which applicant claims to be a resident.

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Following particulars of the parent company of the applicant are required to be provided:  Name, address, country of residence, PAN (if allotted) of immediate as well as ultimate parent companies of the applicant  Taxpayer registration number/ identification number/functional equivalent/any unique number used for identification of the immediate as well as ultimate parent companies of applicant by the government of that country/ specified territory of which it claims to be a resident

Form No 34D

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Form 34D proposed to be amended to include following particular(s) of the nonresident with whom the transaction is undertaken or proposed to be undertaken by a resident applicant  Name, address, telephone and fax number, PAN (if allotted)  Taxpayer registration number/ identification number/ functional equivalent/any unique number used for identification of the non-resident by the government of that country/specified territory of which it claims to be a resident

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 Name, address, country of residence, PAN (if allotted) of immediate as well as ultimate parent companies of the applicant  Taxpayer registration number/identification number/functional equivalent/any unique number used for identification of the immediate as well as ultimate parent companies of the non-resident by the government of that country/specified territory of which it claims to be a resident. The CBDT has invited comments and suggestions from stakeholders and the general public on the draft notification by 25 April 2018 at the email address, [email protected]

Our comments As the government of India is an active participant of BEPS project and is a signa