{"id":356,"date":"2015-09-09T10:02:37","date_gmt":"2015-09-09T10:02:37","guid":{"rendered":"http:\/\/caindelhiindia.com\/blog\/?p=356"},"modified":"2021-07-14T12:15:56","modified_gmt":"2021-07-14T12:15:56","slug":"fatca-law-of-usa","status":"publish","type":"post","link":"https:\/\/www.caindelhiindia.com\/blog\/fatca-law-of-usa\/","title":{"rendered":"FATCA LAW OF USA"},"content":{"rendered":"

FATCA LAW OF USA<\/span><\/strong><\/span><\/span><\/p>\n

Introduct<\/span>ion<\/span><\/strong><\/em><\/span><\/span>:<\/span><\/strong><\/em><\/span><\/p>\n

On 9th<\/sup><\/strong>\u00a0July 2015<\/strong>,\u00a0India has signed the inter-governmental agreement (IGA) on Foreign Account Tax Compliance Act (FATCA) with the USA.\u00a0 The government would now receive information about Indian \u201ctax resident\u201d persons having financial accounts in the USA.\u00a0Financial institut<\/span>ions (FIs) have to perform required due diligence processes, identify \u201creportable persons\u201d from their customers and counter parties and report information pertaining to such persons on an annual basis to the respective local government so as to enable exchange of information.\u00a0\u00a0In fact, for FATCA to be official in India, the Indian government is required to inform the US about completion of the internal procedures.\u00a0 The date of such notification would become the \u201ceffective date\u201d of FATCA implementation.<\/p>\n

Coverag<\/span>e<\/span><\/strong><\/span>:<\/span><\/strong><\/span><\/em><\/p>\n

FI\u2019s are defined to effectively cover those that hold the client or investor\u2019s financial account in the form of deposit of money or investments.\u00a0 As such, banks, deposit taking NBFC\u2019s, depository participants, custodians, brokers, insurance companies and all funds are also covered, unless any specific exemptions may be available under the Inter-governmental Agreement.\u00a0 Some of the exemptions available include exemptions for government bodies and government owned entities, retirement and savings fund (such as provident funds) subject to conditions, small banks, local banks, fund managers as well as brokers, subject to meeting given tests for each category.<\/p>\n

For FATCA purposes, the definition of \u201ctax resident\u201d specifically covers US citizens and green card holders.\u00a0 The coverage of reportable persons goes beyond individual customers.\u00a0 It extends to \u201cnon-participating FIs\u201d and the controlling persons of \u201cpassive entities\u201d.\u00a0 To enable identification, FI\u2019s will have to obtain \u201cself declaration\u201d regarding their FATCA status and classification from relevant customers and counterparties.\u00a0 While onus of providing a correct self declaration rests on the customer\/ counterpart, the FI should exercise due diligence in evaluating the same for consistency with other information or documentation.<\/p>\n

Procedural<\/span> Aspects<\/span><\/strong><\/span>:<\/span><\/em><\/p>\n

Towards FATCA compliance, FI\u2019s will need to reach out to relevant customer accounts that existed as at 30th<\/sup>\u00a0 June 2014 (known as pre-existing accounts) as well those opened from 1st\u00a0<\/sup>July 2014 (known as new accounts).\u00a0Depending upon the size of the account, the account may be out of scope (where aggregate balance with the FI is up to $50,000) or requiring a detailed enquiry of paper records as well as information with the relationship manager (where the aggregate balance is above $1,000,000).<\/strong> Having identified accounts, the FI may, in relevant cases, rely on any declaration and\/or documentary evidence from the customer establishing his non-US status and not report such a customer. New accounts opened from 1st\u00a0<\/sup>July 2014 are required to provide \u201cself certification\u201d on FATCA status and classification.\u00a0 While the FI can rely on such \u201cself certification\u201d, it is expected to exercise required due diligence in evaluating the same for completeness and consistency with other information or documentation pertaining to the customer.<\/p>\n

The reporting period for FATCA is the calendar year, though as an exception, the first period of coverage is the six-month period from 1st\u00a0<\/sup>July 2014.<\/strong> The deadline for inter-governmental exchange of information is 30th<\/sup>\u00a0\u00a0September\u00a0following the reporting period.\u00a0 As such, the Indian government is obligated to share data for the year 2014 (first half period) with the US government by\u00a0\u00a030th<\/sup>\u00a0\u00a0September 2015.\u00a0 The buzz amongst FIs is that the rules and the reporting format would be notified very shortly and FIs may be required to submit their data for 2014 by July\/ August 2015 on a best efforts basis.\u00a0 This will be huge challenge for the FI as well as the government. \u00a0 One can also perhaps cannot think of the customer\u2019s reaction on receiving a lot of mails from various FIs, all asking for FATCA self\u00a0certification in a time bound manner.<\/p>\n

Con<\/span>clusion<\/span><\/strong><\/span><\/span>:<\/span><\/em><\/p>\n

FATCA requires detailed change management processes covering the complete customer life cycle (account opening, account maintenance as well as closure) and several functions such as compliance, product design, customer on-boarding and front end, operations as well as IT.\u00a0The road to the implementation of FATCA in the short term, especially meeting the immediate reporting deadline, is certainly not a smooth one.\u00a0 All parties, especially FIs, need to quickly understand how FATCA impacts them and work out their action plan for FATCA.\u00a0 In the long run, matter should have to be settled down with the hope that all governments, including India, will greatly benefit from improved tax compliance.<\/p>\n

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional\u00a0endeavors. For query or help, contact:\u00a0info@caindelhiindia.com<\/a>\u00a0or call at\u00a0011-23343333<\/p>\n

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FATCA LAW OF USA Introduction: On 9th\u00a0July 2015,\u00a0India has signed the inter-governmental agreement (IGA) on Foreign Account Tax Compliance Act (FATCA) with the USA.\u00a0 The government would now receive information about Indian \u201ctax resident\u201d persons having financial accounts in the USA.\u00a0Financial institutions (FIs) have to perform required due diligence processes, identify \u201creportable persons\u201d from their …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[632,98,695,142,146,123,623,1],"tags":[555,566,502,501,569,572,426,546,561,549,541,537,562,560,550,538],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/356"}],"collection":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/comments?post=356"}],"version-history":[{"count":3,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/356\/revisions"}],"predecessor-version":[{"id":1155,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/356\/revisions\/1155"}],"wp:attachment":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/media?parent=356"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/categories?post=356"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/tags?post=356"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}