1. Investors have to be FATCA-compliant from May 1: Here’s all you need to know

Investors have to be FATCA-compliant from May 1: Here’s all you need to know

FATCA (Foreign Account Tax Compliance Act) of the United States has made it mandatory for overseas financial institutions to give information about non-resident US account holders or face withholding taxes.

By: | Published: May 1, 2017 5:25 PM
You need to enter your PAN details. If you do not have PAN, than you need to enter PAN Exempted KYC Reference Number (PEKRN).

FATCA (Foreign Account Tax Compliance Act) of the United States has made it mandatory for overseas financial institutions to give information about non-resident US account holders or face withholding taxes. Therefore, if any individual and entities who have not provided their self-certification by April 30, their accounts may get blocked by the government from May 1, 2017. However, the Finance Ministry said, “The transactions by the account holder in such blocked accounts may, thereafter, be permitted once the self-certification is obtained and due diligence completed.”

Here is all you need to know about FATCA:

What is FATCA?

With the objective of tackling tax evasion by obtaining information in respect of offshore financial accounts maintained by USA residents and citizens, a law known as “Foreign Account Tax Compliance Act” (FATCA) was introduced. The provisions of FATCA essentially provide for 30 percent withholding tax on US source payments made to Foreign Financial Institution unless they enter into an agreement with the Internal Revenue Service (US IRS) to provide information about accounts held with them by USA persons or entities controlled by USA persons.

As domestic laws of sovereign countries (including India) did not allow sharing of any clients’ confidential information by FIs directly to the USA, eventually the USA entered into Inter-Governmental Agreement (IGA) with various countries. It provided that the Indian FIs will give necessary information to the Indian tax authorities, which will get transmitted to the USA at every periodic interval.

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How to fill FATCA form

You need to enter your PAN details. If you do not have PAN, than you need to enter PAN Exempted KYC Reference Number (PEKRN). Enter your name as mentioned in your PAN card. Mention your annual income details, address, other objective details.

If in case you are a tax resident in any other country other than India, then you need to mention the country of tax residency along with the TIN (Tax Identification Number). If you don not have a TIN available with you, then in such a case you need to mention the reason for the same. After filling the form, you need to sign the FATCA form mentioning your employee ID and the seal of the company.

FATCA & CRS Instructions

If you have any questions about your tax residency, then in such a case you need to contact your tax advisor. And if you are a US citizen or resident or a holder of a green card, then you need to include the United States in the foreign country information field along with your US Tax Identification Number.

The Central Board of Direct Taxes has notified Rules 114F to 114H, as part of the Income- tax Rules, which require Indian financial institutions such as the banks/other financial entities to seek additional personal, tax and beneficial owner information and certain certifications and documentation from all our account holders. In many important cases, information will have to be reported to tax authorities or any appointed agencies. Towards compliance, you may also be required to provide information to any institution such as withholding agents for the purpose of ensuring appropriate withholding from the account or any proceeds in relation thereto. If you further want to make any change in any of the information provided by you in the form, then you must ensure that you have applied for the changes within the next 30 days.

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You must note that you may receive more than one request for information if you have multiple relationships with (Insert FI’s name) or its group entities. Hence it becomes important for you to respond to the request, even if you believe that you have already supplied any previously requested information.

(With inputs from cams online)

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