Reserve Bank kick starts FATCA compliance in India

RAJESH H DHRUVA · Post by **RAJESH H DHRUVA** » Wed Dec 31, 2014 2:39 am

Dear All

1. The Reserve Bank of India has set the ball rolling for Indian financial institutions including Banks for FATCA compliance in India.
2. The RBI has issued a circular advising Banks and others to inform withholding agents about their application being made for Global Intermediary Identification Number (GIIN) which is to obtained before 1st January 2015.
3. Copy of the circular is posted here which is self explinatory.

Best wishes
RAJESH H DHRUVA
femaonline.com

Date: Dec 30, 2014
Inter-Governmental Agreement (IGA) with United States of America (US) under Foreign Accounts Tax Compliance Act (FATCA)- Registration

RBI/2014-15/372
DBR. AML.No. 9644/14.07.018/2014-15

December 30, 2014

The Chairpersons / CEOs of all Scheduled Commercial Banks
RRBs/Local Area Banks / All India Financial Institutions

Dear Madam/Sir,

Inter-Governmental Agreement (IGA) with United States of America (US)
under Foreign Accounts Tax Compliance Act (FATCA)- Registration

Please refer to our circular DBOD. AML. No. 20472 /14.07.018/2013-14 dated June 27, 2014 on the captioned subject.

2. Government of India, has now advised that to avoid withholding tax, Foreign Financial Institutions (FFIs) in Model 1 jurisdictions, such as India, need to register with IRS and obtain a Global Intermediary Identification Number (GIIN) before January 1, 2015. The FFIs who have registered but have not obtained a GIIN should indicate to the withholding agents that the GIIN is applied for, which may be verified by the withholding agents in 90 days. In this regard, the FAQ published on the IRS website (updated as on December 22, 2014), as received from the Government of India, is furnished in the Annex.

3. Accordingly, banks/ Financial Institutions may take action appropriately.

4. Kindly acknowledge receipt of this circular.

Yours faithfully,

(Lily Vadera)
Chief General Manager
Encls: As above

ANNEX
FAQ published on the IRS website updated on December 22, 2014
Q8.
Announcement 2014-38 provides that a jurisdiction that is treated as if it has an IGA in effect, but that has not yet signed an IGA, retains such status beyond December 31, 2014, provided that the jurisdiction continues to demonstrate firm resolve to sign the IGA that was agreed in substance. Given this additional time to sign the IGA, does a reporting Model 1 FFI in such a jurisdiction need to register and obtain a GIIN before January 1, 2015?
Added: December 22, 2014
Announcement 2014-38 does not change the requirement in the chapter 4 regulations that for payments made on or after January 1, 2015, in order for withholding not to apply, a withholding agent may treat a reporting Model 1 FFI as a registered deemed-compliant FFI only if the withholding agent has a withholding certificate identifying the payee as a registered deemed-compliant FFI and the withholding certificate contains a GIIN for the payee that is verified in the manner described in those regulations. Thus, to avoid withholding on certain payments made on or after January 1, 2015, a reporting Model 1 FFI should register and obtain a GIIN to properly certify its status to a withholding agent required to document the FFI for chapter 4 purposes. A reporting Model 1 FFI that has registered but not yet obtained a GIIN should indicate to its withholding agent that its GIIN is "applied for," and in such case, the withholding agent will have 90 days from the date it receives the Form W-8 to obtain a GIIN and to verify the accuracy of the GIIN against the published IRS FII list before it has reason to know that the payee is not a registered deemed-compliant FFI.

Announcement 2014-38 similarly does not change the timing of any other due diligence and reporting requirements in the chapter 4 regulations.

drV · Post by **drV** » Wed Dec 31, 2014 2:57 am

What would this mean for those of us from USA and investing in India ?

RAJESH H DHRUVA · Post by **RAJESH H DHRUVA** » Fri Jan 02, 2015 1:12 am

Dear drV,

1. US Tax Laws require US Citizens ; Green Card Holders and resident of USA [ resident aliens ] to report their worldwide income in US tax return .
.02 They are also required to file Form FinCEN 114 online before 30th June every year whereas till last year Form TD F 90. 22. 1 was to be filed physically if financial interest or signing authority in overseas institutional financial investments exceeded US $ 10,000 during a calendar year.
.03 And under Foreign Account Tax Compliance Act (FATCA) regulations report their foreign financial assets to the IRS if the value of foreign financial assets exceeds US$ 50,000 as on 31st December or US$ 75,000 during the tax year and in case of married couple tax-payers US$ 100,000 and US$ 150,000 respectively.

2. Now if a US tax resident has not complied with any of these requirements , Indian Financial Institutions will be reporting accounts of such persons if the balance exceeded US$ 50000 as on 30th June 2014.

3. The Reserve Bank of India has issued an advisory note to Banks and others regarding legal obligations of availing Global Intermediary Identification Number (GIIN) under FATCA.

4. If an individual has not complied with said provisions he can have the benefits of Streamline Offshore Domestic Procedures(SODP). Details of the said schemes can be found at :

http://www.r2iclubforums.com/forums/showthread.php/36460-Ovdp-bonanza?highlight=ovdp
Best wishes,

RAJESH H DHRUVA
femaonline.com

civic · Post by **civic** » Fri Jan 02, 2015 1:22 am

Thanks Rajesh for sharing this.

Regarding point 2, balance $50,000 is calculated as ON June 30 or the balance between Jan 1 to JUn 30.
i.e if the balance is $51000 on May 30 and subsequently reduced to $45000 on June 5, will this need to reported.

RAJESH H DHRUVA · Post by **RAJESH H DHRUVA** » Sat Jan 03, 2015 1:41 am

Dear civic

1. Going through the details of Inter - Governmental agreements with UK and France it is found that provisions are almost identical and therefor the same can be assumed for India too.

2. Reporting requirements for Pre - existing individual accounts being termed as " US reportable accounts" is an individual account with a balance or value of $50000 or more as o n 30th June 2014.
.02 In case of cash value insurance contract or annuity it is defined as balance or value of $250000 or more as on 30th June 2014.

3. Therefore if an account has balance of say US$ 150,000 as on 30th May which reduces and remains say US$ 45000 on 30th june 2014 for reason of $105,000 being invested in say a plot of land ; such account will not be covered by US reportable account.
.02 It is interesting to note that immovable properties are not covered by FBARs ; FATCA as also penal provisions of SODP.

Best wishes

RAJESH H DHRUVA
femaonline.com

MMS · Post by **MMS** » Sat Jan 03, 2015 2:13 am

I assume this new regulation only affects as far as US IRS filing goes. For USC/OCI residing in USA, having savings account in India, you don't need to do anything different on India taxes. Is this correct?

RAJESH H DHRUVA;589548Dear drV,

if the balance exceeded US$ 50000 as on 30th June 2014.

Is this reportable requirement of $50K balance, per bank or aggregate of all banks? Not that it matters, just trying to get some clarity on this.

civic · Post by **civic** » Sat Jan 03, 2015 2:14 am

Thanks Rajesh for the clarification.

r2i_decide · Post by **r2i_decide** » Mon Jan 05, 2015 10:06 pm

Rajesh and everyone:

Does FATCA cover post office small savings accounts (NSC, KVP, POMIS etc?). I would think that FATCA should cover those also, since they are financial accounts, but then they are with a post office and not a bank. So I am not sure.

I am planning on buying some KVP/NSC for the fixed income section of my portfolio in 2015. Do you know how I need to report them when I file FBAR on FinCen online? Do I have to enter each certificate (this could be logistically tedious since NSC max denomination is 10k) as a separate account?

NOte: I am USC living in India. I filed FBAR and FinCenOnline for the past few years.

RAJESH H DHRUVA · Post by **RAJESH H DHRUVA** » Thu Jan 08, 2015 12:30 am

Dear r2i_decide

1. Reporting by individual under Foreign Account Tax Compliance Act (FATCA) will cover all overseas financial assets .
.02 Unlike FBAR which requires reporting of institutional financial assets only if the same exceed US$ 10,000 in a financial yeaar ; FATCA requires the USC ot GC to declare all overseas financial assets which wouldvalso include personal loans if the value during the year exceeds US$ 150,000 or year end value exceeds US$ 100,000 for married couple filing of Fed returns.

2. Therefore post office savings account , Kishan Vikas Patra (KVP) schemes , National Savings Certificated ( NSC ) and Post Office savings monthly schemes are all covered under FATCA.

3. Under the Foreign Bank Account Reporting(FBAR) each account is to be individually identified.
.02 Therefor if the masterfolio is same then lump sum reporting will suffice.

4. On a different note NRIs cannot invest in KPV , NSC or in Post Office schemes as also Public Provident Fund(PPF) accounts unless continued prior to 2004 as the same is forbidden since 2004.

Best wishes.

RAJESH H DHRUVA
femaonline.com

Lakshya · Post by **Lakshya** » Thu Jan 08, 2015 12:34 am

RAJESH H DHRUVA;590254

2. Therefore post office savings account , Kishan Vikas Patra (KVP) schemes , National Savings Certificated ( NSC ) and Post Office savings monthly schemes are all covered under FATCA.

How will they determine that holder of this acct is NRI/GC or USC? – Thanks….