(1) This chapter shall apply for the purposes of sub-sections (3) to (5) of section 108.
(2) The purpose of this Chapter is to prescribe documents, information, files and reports which certain taxpayers are required to keep, maintain and furnish to the Board and the Commissioner under sub-sections (3) to (5) of section 108.
(3) Nothing in this Chapter shall preclude a taxpayer accounting for income chargeable under the Ordinance, from-
(a) maintaining any books of account, documents or records in addition to those prescribed in these rules; or
(b) maintaining the books of account, documents or records in the manner prescribed keeping in view the head of the income of the taxpayer and, wherever applicable, the nature of the taxpayer's business.
(4) Definitions.- In this Chapter,—
(a) “consolidated financial statements” mean the financial statements of an MNE group in which the assets, liabilities, income, expenses and cash flows of the ultimate parent entity and the constituent entities are presented as those of a single economic entity;
(b) “competent authority agreement” means an agreement, —
(i) that is between authorized representatives of those foreign jurisdictions that are parties to an international agreement with Pakistan;and
(ii) that provides legal authority for the automatic exchange of country-by-country reports between the party jurisdictions;
(c) “constituent entity” means,-
(i) any separate entity of an MNE group that is included in the consolidated financial statements of the MNE group for financial reporting purposes or would be so included if equity interests in such business unit of an MNE group were to be traded on a stock exchange;
(ii) any such entity that is excluded from the MNE group’s consolidated financial statements solely on size or materiality grounds; and
(iii) any permanent establishment of any separate entity of the MNE group included in sub-clauses (i) or (ii), provided the entity prepares a separate financial statement for such permanent establishment for financial reporting, regulatory, tax reporting or internal management control purposes;
“Explanation.— The expression “constituent entity resident in Pakistan” wherever appearing in this Chapter shall include permanent establishment in Pakistan of a non-resident person.”;
(d) “country-by-country report” means a report in respect of an MNE group, containing—
(i) the aggregate information in respect of the amount of revenue, profit or loss before income tax, amount of income tax paid, amount of income tax accrued, stated capital, accumulated earnings, number of employees and tangible assets not being cash or cash equivalents, with regard to each country or territory in which the group operates;
(ii) the details and identification of each constituent entity of the group including the country or territory in which such constituent entity is incorporated or organised or established and the country or territory where it is resident; and
(iii) detailed description of the nature and details of the main business activity or activities of each constituent entity; and
(e) “entity” means a company or an association of persons;”;
(f) “fiscal year” means-
(i) a tax year, in a case where the ultimate parent entity or surrogate parent entity is resident of Pakistan; and
(ii) an annual accounting period with respect to which the ultimate parent entity of the MNE group prepares its financial statements under any law for the time being in force or the applicable accounting standards of the country or territory of which such entity is a resident, in case the ultimate parent entity or surrogate parent entity is not resident of Pakistan;
(g) “group” means a collection of entities related through ownership or control, such that-
(i) it is either required to prepare consolidated financial statements for financial reporting purposes under any law for the time being in force or the accounting standards of the country or territory of which the parent entity is resident; or
(ii) would have been required to be prepared had the equity shares of any of the entity were listed on a stock exchange in the country or territory of which the parent entity is resident;
(h) “international agreement” means an agreement referred to in sub-section (1) of section 107 and includes the Multilateral Convention for Mutual Administrative Assistance in Tax Matters, any bilateral or multilateral tax convention or any Tax Information Exchange Agreement to which Pakistan is a party and that by its terms provides legal authority for the exchange of tax information between jurisdictions, including automatic exchange of such information;
(i) “MNE group” means any group that-
(i) includes two or more entities the tax residence for which is in different jurisdictions or includes an entity that is resident for tax purposes in one jurisdiction and is subject to tax with respect to the business carried out through a permanent establishment in another jurisdiction; and
(ii) has a total consolidated group revenue equivalent to seven hundred and fifty million euros or more, or an equivalent amount in Pakistan Rupees, during the fiscal year immediately preceding the reporting fiscal year as reflected in its consolidated financial statements for such preceding fiscal year;
(j) “related party” means an associate as defined in section 85 of the Ordinance.”;
(k) “reporting entity” means the constituent entity including the parent entity or the surrogate parent entity or any constituent entity under rule 27D, that is required to file a country-by-country report in its jurisdiction of tax residence on behalf of the MNE group;
(l) “reporting fiscal year” means that fiscal year, the financial and operational results of which are reflected in the country-by-country report;
(m) “surrogate parent entity” means any constituent entity of the MNE group that has been designated by such MNE group, in place of the ultimate parent entity, to file the country-by-country reports in the country or territory in which the said constituent entity is resident, on behalf of such MNE group;
(n) “systemic failure” with respect to a country or territory means that the country or territory has a competent authority agreement in effect with Pakistan, for automatic exchange of country-by-country reports, but-
(i) has suspended automatic exchange, for reasons other than those that are in accordance with the terms of that agreement;or
(ii) otherwise persistently failed to automatically provide to Pakistan country-by-country reports in its possession of MNE groups that have constituent entity or entities in Pakistan;
(o) “ultimate parent entity” means a constituent entity of an MNE group that meets the following criteria, namely:-
(i) it owns directly or indirectly a sufficient interest in one or more constituent entities of such MNE group such that it is required to prepare consolidated financial statements under any law for the time being in force or the accounting standards of the country or territory of which the entity is resident or it would have been required to prepare a consolidated financial statement had the equity shares of any of the enterprises were listed on a stock exchange in the country or territory of which the entity is resident; and
(ii) there is no other constituent entity of such MNE group that owns directly or indirectly an interest described in sub-clause (i) in the first mentioned constituent entity.
