Who has to file the master file in India?
Indian constituent entities of international groups above the applicable thresholds. The obligation attaches to the Indian entity even though the document describes the whole group, which is the feature that catches overseas parents out: the filing is made locally, by the local company, about the parent's global business. The thresholds are applied to the group and to the Indian entity's position within it, so the scoping exercise needs group figures as well as local ones. A nil tax result in India does not affect the answer, because the obligation is decided by facts rather than by tax owing.
Our parent prepared the group master file. Can we just file that?
You can start from it, and you should, but you cannot file it unread. Form 3CEAA is a group document filed locally, which means the Indian entity is responsible for the accuracy of a description its parent wrote. In practice the parent's draft describes the global structure, the intangibles and the financing at a level of generality that has to be checked against what the Indian entity actually does and actually holds. Where the draft and the Indian records disagree, the filing has to reflect the records, and the difference needs raising with the parent.
Do all our Indian entities have to file Form 3CEAA?
Where a group has more than one Indian constituent entity, the group can nominate one of them to make the filing on behalf of the others, and the nomination itself needs to be documented rather than assumed. What goes wrong is a group deciding informally which entity will file and never recording the decision, so no entity can show why it did or did not file. We settle the nomination in writing, keep the evidence with the filing, and check the position again whenever the group's Indian footprint changes.
What does the master file actually have to describe?
It describes the multinational group's global structure, its intangibles and its financing. Those three headings are where the work sits. Structure means the legal and ownership chain and where the operating substance actually is. Intangibles means what the group owns, which entity developed it and who bears the cost of maintaining it. Financing means the intra-group funding arrangements and the terms on which they run. Each heading has to be recognisable to someone reading the Indian entity's own accounts, because that reader is the one who will compare the two.
Is the Indian entity responsible for what the parent wrote?
Yes, and that is the practical point of the whole exercise. The document is filed locally, so the Indian entity answers for a description drafted somewhere else. The way to make that safe is to read the parent's draft as a claim to be verified rather than a text to be forwarded: check the ownership chain against the register, the intangibles description against the agreements the Indian entity is party to, and the financing description against its own loan documentation. Discrepancies found before filing are corrections. Found afterwards they are questions.
Does the master file have to agree with our other group filings?
Reconciling it with the group's other local files is the substance of the engagement. The master file describes the group's structure, intangibles and financing in one place, and each country's local documentation describes a slice of the same facts. An officer comparing them is comparing descriptions of one business, so a difference in how an intangible is characterised, or in how a funding arrangement is described, reads as a contradiction rather than as a variation in drafting. We reconcile the descriptions and record the reason for any difference that is deliberate.
What is a transfer pricing policy, and is it the same as documentation?
No. The policy is the forward-looking statement of how your intercompany prices are set — which method for which transaction, which comparables, what happens when margins drift. The documentation is the backward-looking evidence that the policy was applied and produced an arm's length result for that year. Authorities read both, and a policy that the intercompany invoices do not actually follow is worse than none, because it establishes what you knew you should have done. See do you need documentation.
What is OECD Pillar One?
The part of the international agreement that reallocates a share of taxing rights over the very largest and most profitable groups to the jurisdictions where their customers and users are, regardless of physical presence — plus a simplified approach to routine marketing and distribution returns. It is aimed at the digitalised economy problem that physical-presence rules could not reach, and its implementation is still moving, which is why we read the current instrument rather than the original blueprint. See BEPS and Pillar Two.
