Does my Indian subsidiary have to file Form 3CEB?
If the Indian company entered into a transaction with an associated enterprise outside India during the year, yes. Form 3CEB is the accountant's report on international and specified domestic transactions with associated enterprises, and the obligation follows the relationship and the transaction rather than the tax result. A subsidiary of a Canadian or United States group that received services, paid a royalty, borrowed from its parent or sold goods within the group is inside the scope. A nil tax position does not remove the filing, because the report certifies the method used and the pricing applied, not the amount of tax owing.
Is Form 3CEB needed if the intercompany amounts are small?
Yes. The report is mandatory regardless of transaction size once there is an international related-party transaction. There is no floor below which the certificate becomes unnecessary, which surprises groups whose only cross-border dealing is one modest management recharge or a cost reimbursement. The practical consequence is that the smallest transactions still need a documented method, a comparability rationale and a price that can be explained. Scoping is usually the cheap part of the work. Discovering after an assessment notice that a recharge was inside the scope is not.
We charge no interest on a group loan. Does that count?
An advance between associated enterprises is a transaction whether or not a price was charged for it. The absence of interest is itself a pricing outcome, and it is the outcome the report has to certify. In practice this is one of the more common omissions on a first Form 3CEB: the finance team lists invoices and leaves out the intercompany balance, because nothing was billed on it. Treat every movement of money, goods, services or rights between the Indian entity and its overseas group as reportable until the scoping work says otherwise.
Who signs Form 3CEB, the company or an accountant?
It is an accountant's report, so it carries a professional certification of the method and the pricing, and the Indian entity makes the filing. The division of labour matters when an overseas parent owns the numbers: the certifying accountant needs the intercompany agreements, the transfer-pricing policy and the underlying ledgers, and the Indian entity has to be able to stand behind all three. Our part of this work is assembling that file and reconciling it with the group's own documentation, so the certificate rests on records that agree with each other.
Does Form 3CEB cover Indian domestic transactions as well?
The report covers international transactions and specified domestic transactions with associated enterprises. Groups arriving from Canada or the United States tend to read it as a purely cross-border document and scope only the dealings that cross a border. That leaves out transactions between Indian group companies which the report also reaches. The safer sequence is to map every associated enterprise first, inside and outside India, then classify the transactions with each of them, and only then decide what the report has to describe.
Our parent keeps group transfer pricing files. Do we still file in India?
Group documentation does not discharge the Indian filing. Form 3CEB is filed locally by the Indian entity and certifies that entity's transactions, methods and prices, so a global policy paper prepared at head office is an input to it rather than a substitute for it. It is also the document an Indian transfer-pricing officer opens first, which makes consistency between it and the group's material a practical concern rather than a tidying exercise. Where the two disagree, the disagreement is what gets asked about.
What is transfer pricing?
The meaning of transfer pricing is narrow and specific: it is how related companies in a group price what they sell each other — goods, services, financing, the use of intellectual property. Tax law requires those prices to be what independent parties would have agreed, the arm's length principle, so profit is not simply moved to a lower-taxed country. Canada tests it under s.247, the US under s.482, India under s.92, and each expects documentation prepared contemporaneously. See transfer pricing documentation.
What is an advance pricing arrangement?
An agreement with a tax authority, in advance, on how a category of intercompany transactions will be priced for a set number of years. Unilateral arrangements bind one country; bilateral or multilateral ones bind both sides of the transaction and are what actually removes the risk of an adjustment in one country without relief in the other. They take real time and full disclosure, so they suit large recurring flows rather than one-off transactions. See our transfer pricing work.
