![]() The customers shall have to be classified according to the FATCA legislation. * Indian FIs shall have to review their entire customer base, new as well as existing, for the above indicia. * Indian FIs may need to change their internal processes to ensure that they have sufficient information in addition to the standard KYC norms, thereby ensuring that no violation takes place on account of insufficient information. Satisfaction of any of this criteria is not in itself determinative of whether or not the account is owned by a US person, it only means that the Indian FI will need to scrutinise the account further to establish whether or not the account is owned by a US person. The US status indicia for individuals and institutions are listed in the accompanying table. * Indian KYC norms may not contain the US status indicia (indications) which are the fundamental basis for determination of US status. In the Indian context, the following challenges are expected: The entering into the IGA by India is a welcome move for Indian FIs since the compliance will be much easier than it would have been in the absence of an IGA.Ĭompliance with the FATCA is proving to be a challenge for FFIs and the Indian experience is not expected to be different. FIs not having such branches can register before December 22, 2014, so as to be on the list of IRS-compliant entities by January 1, 2015. ![]() The registration deadline for FIs having branches in countries which do not have an IGA with the US under Model-1 is June 3, so as to be on the list of IRS-compliant entities by July 1, 2014. However, Indian FIs will have to register online at the IRSs registration portal. Indian FIs shall no longer be required to enter into an agreement with the IRS and will automatically attain deemed compliant status. India has consented to Model-1A IGA in terms of which the Indian FIs shall be able to report information on their US account holders through the Central Board of Direct Taxes (CBDT) instead of reporting directly to the IRS. ![]() The penalty for non-compliance by FFIs entails a withholding tax of 30% on their US-sourced income/receipts.īut what does this mean for Indian financial institutions (FIs) The FATCA will come into force from July 1, 2014, and requires foreign financial institutions (FFIs) such as banks, mutual funds, hedge funds, insurance companies, etc, to register with the Internal Revenue Services (IRS) of the US and furnish certain information regarding accounts held by US persons that are worth more than $50,000. In April this year, India entered into an inter-governmental agreement (IGA) with the US government for the implementation of the Foreign Account Tax Compliance Act (FATCA), 2010, of the US.
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