On 16 November 2017, the Federal Board of Revenue (FBR) in Pakistan has published SRO 1191(1)/2017, which includes chapter VIA to the Income Tax Rules of 2002. The new Chapter (VIA) identifies the reporting entities, clarifies the reporting deadlines and gives a brief explanation to the contents of the country-by-country (CbC) reports, master files and local files.
The main points of the new chapter are summarized below:
Country-By-Country reporting requirements:
For every constituent entity resident in Pakistan must submit details of the ultimate parent entity or surrogate parent entity to the FBR on a yearly basis in due time. The ultimate parent entity or surrogate parent entity, if possible, must declare as such to the FBR by the tax return filing deadline annually. The information shall be provided by 15 February 2018.
Standard ultimate parent, surrogate parent, and local secondary submission requirements with a deadline of 12 months after the end of the reporting fiscal year of the MNE group (tax year 2017 report to be filed by 31 March 2018).
A Pakistani resident entity, other than the ultimate parent entity or the surrogate parent entity, may be designated to file the CbC report if:
- the ultimate parent entity is not obligated to file a CbC report in its residence state;
- the country of residence of the ultimate parent entity does not have a competent authority agreement with Pakistan to exchange the CbC report;
- the residence state of ultimate parent company has failed to exchange information systematically; or
- the surrogate parent entity has not furnished the CbC report;
CbC reports can be exchanged by the board within 15 months after the end of the tax year of a group of companies. The CbC report for tax year 2017 can be exchanged by 30 June 2018.
Documentation requirements:
The Master file documentation requirements apply for a Pakistani resident entity if its annual turnover exceeds PKR 100 million. A master file generally contains information relating to the group’s structure, main business activities, supply chain, geographical markets, transfer pricing policies and financial information should be included in the master file
A Pakistani resident entity also must present a local file at due time after the tax return filing deadline if its transactions with related party exceeds PKR 50 million. A local file generally contains information regarding the local entity’s organizational structure, business activities, business strategies, related party transactions, transfer pricing methods adopted and financial information.
