On 1 August 2019, India has published the Finance (No. 2) Act 2019 in the Official Gazette, which was approved by the president. The measures of the Act are in line with those presented as part of the Union Budget for 2019-20.

Corporate tax changes:

The standard corporate tax rate is maintained at 30%, while the maximum income threshold for the reduced corporate tax rate of 25% is increased from INR 2.5 billion to INR 4 billion.

The loss carry forward limits where there is a change of ownership are amended with effect from 1 April 2020 to provide that even if the conditions (minimum 50% same ownership) for carry forward are not satisfied in case of an eligible start-up, the loss incurred in any year prior to the previous year shall be allowed to be carried forward and set off against the income of the previous year under certain conditions.

The available exemptions from the loss carry forward limits are extended with effect from 1 April 2020 to include that an exemption will apply to a company, and its subsidiary and the subsidiary of such subsidiary, where:

• the National Company Law Tribunal (NCLT) has suspended the Board of Directors of such company and has appointed new directors, who are nominated by the Central Government; and
• there has been a change in shareholding of a company, and its subsidiaries and the subsidiary of such subsidiary in a previous year pursuant to a resolution plan approved by the NCLT.

The conditions for the special tax regime for offshore funds are amended with effect from 1 April 2019 to provide that:

• the corpus of the fund shall not be less than INR 1 billion at the end of a period of six months from the end of the month of its establishment or incorporation or at the end of such previous year, whichever is later; and
• the remuneration paid by the fund to an eligible fund manager in respect of fund management activity undertaken by him on its behalf is not less than the amount calculated in such manner as may be prescribed.

Transfer pricing changes:

The new Act amended the CbC reporting rules with retrospective effect from 1 April 2017. Accordingly, where an alternate reporting entity (ARE) in India is designated to file a CbC report, it is the accounting year of the ultimate parent of the MNE group, and not the ARE, that is referenced for the purpose of the CbC reporting obligation.

The Master file rules are amended with effect from 1 April 2020, to provide that a constituent entity of an international (MNE) group must keep and maintain the Master file and submit the required form even when there is no international transaction undertaken by the constituent entity.

The rules for assessments in regard to Advance Pricing Agreements (APAs) are amended with effect from 1 September 2019. Accordingly, where an assessment or reassessment has already been completed and a modified return of income has been filed by a taxpayer having regard to the terms of the APA, then the Assessing Officer must pass an order modifying the total income determined in the earlier completed assessment or reassessment, having regard to and in accordance with the APA.