INDIAN BANKS to PROVIDE INFO of NRI A/Cs. to IRS

 

FATCA  & CRS COMPLIANCE BY MUTUAL FUND HOUSES


Dear Friends,
 

Greetings of the day!!! 
 

We are communicating to a certain set of investors to provide us with details such as Country of Tax residence, Tax Identification Number from such country, Country of Birth, Country of Citizenship, etc under the FATCA/CRS obligation. Individual Investors are expected to provide details such as Place and Country of Birth, Country of Citizenship/Nationality, all countries of tax residency, Tax Identification Number from each such country, etc. in Additional KYC, FATCA & CRS Updation Form.
 

In case of Non-individual investors, referred as ‘Entity’, are expected to provide details such as Place and Country of Incorporation, all countries of tax residency, Tax Identification Number from each such country, as well as additional details related to the type of entity, details of Ultimate Beneficial Owners. The forms are FATCA - CRS Updation Form (Non- Individuals) and Ultimate Beneficial Ownership (UBO) Form (Non-Individuals).

Sample e-mailer is attached below for your kind reference. We are communicating this to you, to keep you informed and take necessary actions in case your clients receive this communication from DSP BlackRock and check with you on the same. Please guide your clients and assist them in providing the details to the Fund as soon as possible. In case you want any clarifications, please reach out to anyone of us.

Key Dates to Remember:

- 30th November 2015 – Last date of submission of these details.

- 1st January 2016 - We will not be able to accept any purchase or switch transactions in mentioned folios, if the additional KYC details are not updated. 
 

- 1st November 2015 - For all new accounts/folios opened on or after, details related to FATCA and CRS will have to be provided mandatorily, failing which application to open the new account(s)/folio(s) may not be considered.

 
 

 

Subject : Important information required under new IT Rules (FATCA / CRS Obligations) and KYC.

Ref: Your Folio Number _______________


Dear Investor,

This communication is to update you regarding certain recent developments commonly known as ‘FATCA/ CRS Implementation’, KYC Additional information and the consequent need for investors to provide us certain information.

Background:
 

1. India has joined the Multilateral Competent Authority Agreement (MCAA) on Automatic Exchange of Financial Account Information (AEOI) on Jun 3, 2015 and has agreed to certain global standards on automatic exchange of information, known as Common Reporting Standards (CRS). Further, the Government of India (GoI) signed an Inter-Governmental Agreement (IGA) with United States of America (USA) on Jul 9, 2015 to improve international tax compliance and to implement Foreign Account Tax Compliance Act (FATCA) in India.

   

2. To implement the CRS on AEOI and also the IGA with USA, the GOI has made necessary amendments in the Income-tax Rules, 1962 vide amendment dated Aug 7, 2015 and inserted Rules 114F to 114H. These rules are available on: http://www.incometaxindia.gov.in/Pages/communications/notifications.aspx.

 

3. SEBI has issued a circular dated Aug 26, 2015 advising all registered intermediaries (which includes Indian Mutual Funds) to implement FATCA and CRS as per above mentioned rules.

 

We do understand that the information mentioned above is technical in nature and hence we advise you to consult your financial or tax advisor for more details.

 

Information needed from investors:

 

Meanwhile, to ensure necessary and timely reporting to the GoI, we require certain additional information from investors, as described below:

1. Place and Country of Birth, Country of Citizenship/Nationality,

2. All countries of tax residency (other than India), Tax Identification Number and Identification Type of each such country,

3. Additional KYC details such as Income details, occupation and PEP status.
 

Immediate action expected from investors:

We request you to provide us the above mentioned information, latest by 30th November 2015, in the attached form. Please note that the information is needed for each of the unit holders in the folio.

How to submit the form:

You may send the duly filled and signed form through your distributor or in any of the following manner, as convenient to you:

1. Scan and email to service@dspblackrock.com through your Email ID registered in the folio,

2. Submit to any of our offices or the offices of our Registrar and Transfer Agent viz. CAMS, or


 3. Post to ‘Computer Age Management Services Pvt. Ltd., Unit: DSP BlackRock Mutual Fund, Rayala Towers - I, 158, Anna Salai, Chennai - 600 002, India’; Please superscribe the envelope with 'FATCA/CRS Details Updation’.


We request you to kindly provide us the required details within the stipulated time, since as per Income Tax Rules mentioned above we are required to report information regarding:

1. Those investors who do not provide the required information in time, and we may have to freeze the accounts/folios for any further subscriptions or switch transactions.

2. All accounts (new and existing) identified as ‘reportable’ as per the rules.


 

Please also note that for all new accounts/folios opened by you on or after 1st November, 2015, details related to FATCA and CRS will have to be provided mandatorily, failing which your application to open the new account(s)/folio(s) may not be considered.

 

Further, effective January 01, 2016, we will not be able to accept any purchase or switch transactions in your folio, if the additional KYC details are not updated.

Kindly get in touch with your financial advisor or tax advisor should you need any additional details or clarifications or assistance in filling up the attached form.

 

 

Thanking you,

 

 

DSP BlackRock Mutual Fund

www.dspblackrock.com, service@dspblackrock.com
Contact Centre: 1800 200 4499 (Monday through Saturday, 8am to 9pm)

 

 

Enclosed: Prefilled form for your convenience.

 

 

If you reply to this email directly, we might not get it. We do want to hear from you, so please reply to service@dspblackrock.com.  

with regards
sincerely,

RAJESH H DHRUVA
Chief Executive
femaonline.com
Tel. No. : 0091 281 245 3367 (four lines) / 245 9613
Cell : 0091 98240 49944
email : rajesh@femaonline.comkeynote@nribanks.com

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Dear Friends,


Good wishes.
INDIAN GOVERNMENT HAS FINALLY SIGNED THE INTER GOVERNMENTAL AGREEMENT (IGA) WITH USA ON 9th JULY 2015 and the IGA under the Foreign Assets Tax Compliance Act (FATCA) requires Indian Banks, Mutual Fund Houses , Insurance Companies and Brokerage Houses to identify & report  accounts showing US Citizenship , US Addressees , US Phone numbers , Place of birth or USA Power of Attorney to the Internal Revenue Service (IRS) of USA before 30th June 2016.

So NOW it is absolutely necessary for USA Citizens or Green Card Holders & other USA taxpayers who have Bank accounts, Mutual Fund accounts etc. in India and have failed to show Indian income in F 1040 or failed to File Foreign Bank Account Reports to opt for the Streamlined Filing Compliance Procedure (SFCP) a very liberal scheme for declaration of Indian income and financial assets not declared earlier by paying a penalty of only 5% of highest value of overseas Indian financial assets over previous 6 year ends and revision of last 3 years Fed Tax Returns & FBAR returns for last 6 years.

http://www.femaonline.com/femamodule.php?id=20

But for sure this indeed is the last opportunity  as a failure to opt for SFCP can result in penal action by the IRS upon receipt  of NRI account holders' account information from all Indian banks , Mutual Fund Houses, Insurance Companies and Stock brokers where after one cannot opt for SFCP / SDOP and be liable for civil & criminal action.

The IGA can be viewed on our website at : http://www.femaonline.com/PDFs/India_iga_final-_india_english.pdf

On their part Banks , Mutual Funds , and Indian Financial Institutions have initiated their exercises of availing information and declaration from NRI clients as they are required to submit the information to Central Board of Direct Taxes (CBDT) . Copy of HDFC Bank communiction and declaration form from NRIs are posted herein

You can avail our professional services regarding Streamlined Domestic Offshore Procedure (SDOP) by way of Computation of penalty ; preparations of Indian income in US$ terms for revising Fed Tax returns for previous 3 years ;  annexures of Foreign Bank Account Reporting (FBAR) for previous 6 years. ; annexures  of Foreign Assets Tax Compliance Act (FATCA) for previous 3 years  and address  queries of US CPA and lawyer if any. 

We will also be happy to revert to your queries if you need any clarifications .

with regards,
sincerely,

RAJESH H DHRUVA
Chief Executive
femaonline.com
 

Tel. No. : 0091 281 245 3367 (four lines) / 245 9613
Cell : 0091 98240 49944
email : rajesh@femaonline.comkeynote@nribanks.com  

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HDFC BANK LETTER

Dear Mr. ,

Good Day !!

Hope you are fine and in best of the health.

As you might be aware, on 9 July 2015, India has signed an inter-governmental agreement with the United States of America for co-operation on Foreign Account Tax Compliance Act (FATCA). In addition, India has also signed the OECD’s Model Competent Authority Agreement for tax information sharing in accordance with multilateral Common Reporting Standard (CRS) on 3 June 2015.  These developments have resulted in compliance and reporting obligations on Financial Institutions like HDFC Bank.

We are now being required to submit to the Indian Government, on an urgent basis, information on customers, particularly with US tax residency.  Hence we are writing to all relevant customers, such as you, to seek confirmation and additional information to determine your tax residency in the US and/ or in any other countries (other than India).

Under the applicable Rules, HDFC Bank will be required to report your account to the Indian tax authorities or any other agencies, as may be applicable, on the basis of available details in respect of your account.

On the basis of internal verification and inquiry performed at our end, one or more U.S. indicia were observed in your records with us.

We urge you to cooperate in providing us before 10th August 2015, a self-certification with the required details in the attached format. In case you wish to state that you are not a US tax resident, please submit your self-certification along with the applicable “curing documents (refer list below).

Please note that, in any case, it is mandatory to submit filled in self-certification (along with any curing documents) at the latest by 10th August 2015. You may submit a signed scanned copy of the attached self-certification from your registered email id along with self-attested scan copy of the curing document (if applicable).

We would like to inform you, that as per India and United States Inter Governmental Agreement (IGA) to implement the Foreign Account Tax Compliance Act (FATCA), it is mandatory to have self-certification of the account holder to indicate the jurisdiction(s) of residence for tax purposes on bank's record otherwise bank will be constrained to close the account on non-receipt of such self-certification.

In case you require any assistance on this / have queries in this regard, please feel free to approach back to me.

Should you require more information regarding the FATCA regulations, please visit website http://www.hdfcbank.com/nri_banking/home.htm

Warm Regards,

|| Relationship Manager - NRI Services || HDFC Bank Ltd. || Rajkot ||
"Wherever in the world you are one bank takes care of your needs"
My business depends on your thoughtful referrals. If you have benefited from my banking or investment advice, please share my name with your friends, relatives or professional associates.
 

FATCA/CRS Annexure - Individuals (including sole-proprietors)

(Applicable for Resident and Non-Resident Customers)

(Please consult your professional tax advisor for further guidance on your tax residency, if required)

Date: __________ Place: ____________ AOF ref number: ___________________

Details under FATCA / Foreign tax laws First Account Holder Second Account Holder
Please fill the information below as requested
Name of the Account Holder
Customer ID
Residence Address for Tax purpose (including city, state, country and pin code)
Address Type: (a) Residential or Business, (b)Residential (c) Business (d) Registered Office
Mobile/ Telephone Number (including ISD and STD code)
Date of Birth (DD-MON-YYYY)
City of Birth
Country of Birth
Nationality (if national of more than country, please mention all the countries separated by a comma)
Gender (Male, Female, Others)
PAN
Father’s Name (mandatory if PAN not provided)
Aadhar Number (optional)
Spouse’s Name (optional)
 

FATCA/CRS Annexure - Individuals (including sole-proprietors)

Occupation Type (Service, Business, Other-Please specify)
Identification Type- Documents submitted as proof of identity of the individual

(Passport, Election Id Card, PAN Card, ID Card, E - Driving License, UIDAI Letter, NREGA job card, Others)

Identification Number - for the identification type mentioned above (mandatory if PAN or adhaar not provided)
 
Are you a tax resident of any country other than India?

If no, please tick below

 First account holder - I am a tax resident of India and not resident of any other country

 Second account holder - I am a tax resident of India and not resident of any other country

If yes, please indicate all countries in which you are resident for tax purposes and the associated Tax Reference Numbers below. Account holder details Name of Customer Country/(ies) of Tax residency # Tax Identification Number (TIN)% Identification Type (TIN or Other%, please specify)
First
Second
 
# To also include USA, where the individual is a citizen/ green card holder of USA

% In case Tax Identification Number is not available, kindly provide functional equivalent$

Certification

I/We have understood the information requirements of this Form (read along with the FATCA Instructions) and hereby confirm that the information provided by me/us on this Form is true, correct, and complete. I/We also confirm that I/We have read and understood the FATCA Terms and Conditions above and hereby accept the same.

Signature of first holder Signature of second holder

Date: __/ ___/ ____ Place: _________________________

FATCA/CRS Annexure - Individuals (including sole-proprietors)

FATCA/CRS Instructions

Details under FATCA/Foreign Tax Laws: Towards compliance with tax information sharing laws, such as FATCA and CRS, we would be required to seek additional personal, tax and beneficial owner information and certain certifications and documentation from our account holders. Such information may be sought either at the time of account opening or any time subsequently. In certain circumstances (including if we do not receive a valid self-certification from you) we may be obliged to share information on your account with relevant tax authorities. If you have any questions about your tax residency, please contact your tax advisor. Should there be any change in any information provided by you, please ensure you advise us promptly, i.e., within 30 days. Towards compliance with such laws, we may also be required to provide information to any institutions such as withholding agents for the purpose of ensuring appropriate withholding from the account or any proceeds in relation thereto. As may be required by domestic or overseas regulators/ tax authorities, we may also be constrained to withhold and pay out any sums from your account or close or suspend your account(s).

If you are a US citizen or resident or green card holder, please include United States in the foreign country information field along with your US Tax Identification Number. Foreign Account Tax Compliance provisions (commonly known as FATCA) are contained in the US Hire Act 2010.

$It is mandatory to supply a TIN or functional equivalent if the country in which you are tax resident issues such identifiers. If no TIN is yet available or has not yet been issued, please provide an explanation and attach this to the form.

Please note that you may receive more than one request for information if you have multiple relationships with HDFC Bank or its group entities. Therefore, it is important that you respond to our request, even if you believe you have already supplied any previously requested information.

In case customer has the following Indicia pertaining to a foreign country and yet declares self to be non-tax resident in the respective country, customer to provide relevant Curing Documents as mentioned below: FATCA/ CRS Indicia observed (ticked) Documentation required for Cure of FATCA/ CRS indicia
If customer does not agree to Specified U.S. person status
U.S. place of birth 1. Self-certification (in attached format) that the account holder is neither a citizen of United States of America nor a resident for tax purposes;

2. Non-US passport or any non-US government issued document evidencing nationality or citizenship (refer list below); AND

3. Any one of the following documents:

a. Certified Copy of "Certificate of Loss of Nationality or

b. Reasonable explanation of why the customer does not have such a certificate despite renouncing US citizenship; or Reason the customer did not obtain U.S. citizenship at birth

Residence/mailing address in a country other than India 1. Self-certification (in attached format) that the account holder is neither a citizen of United States of America nor a resident for tax purposes; and

2. Documentary evidence (refer list below)

Telephone number in a country other than India (and no telephone number in India provided) 1. Self-certification (in attached format) that the account holder is neither a citizen of United States of America nor a resident for tax purposes; and

2. Documentary evidence (refer list below)

Standing instructions to transfer funds to an account maintained in a country other than India 1. Self-certification (in attached format) that the account holder is neither a citizen of United States of America nor a resident for tax purposes; and

2. Documentary evidence (refer list below)

 

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Dear  Friends,

Good wishes.

 

Pls find breif details of US tax laws requring tax payment and declaration of overseas including Indian income and financial assets under Internal Revenue Code. (IRC).

I.    GLOBAL INCOME OF US CITIZENS AND RESIDENT ALIENS IS TAXED IN USA:-
1.    US Tax Laws require US Citizens ; Green Card Holders  and resident of USA [ resident alien ] to report their worldwide income in US tax return .
2.    However tax payers are not burdenize to pay tax twice.  Tax payers can opt for applicability of USA India Tax Treaty or other country's Tax Treaty
if income arises from such other country  and if the provisions of Tax Treaty are beneficial.
3.     IRS Weblink:
http://www.irs.gov/Businesses/Income-from-Abroad-is-Taxable

II.    REPORT OF FOREIGN BANK AND FINANCIAL ACCOUNTS (FBAR):-
1.    It is a simple reporting form of  overseas financial accounts held by US citizens or US residents  in their names or wherein they have signing
authority or control. It is to be filed online in Form FinCEN 114  before 30th June every year.
2.    It is required to be filed by  a person who is a US citizen, resident of USA, a USA partnership firm, a Limited Liability Company (LLC) or trust
(referred as United States Person) which has financial interest or signing authority in overseas financial investment exceeding US $ 10,000  during a
calendar year.
3.    Foreign Financial Account includes all accounts maintained with a financial institution such as Securities ; brokerage account; Bank accounts;
Commodity Futures & Options Accounts; insurance policy and any annuity with cash value;  Mutual fund or similar pooled fund and any account maintained with a foreign financial institution.
4.    The link to IRS website is :-
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Report-of-Foreign-Bank-and-Financial-Accounts-FBAR

 III.  FOREIGN ACCOUNT TAX COMPLIANCE ACT (FATCA) :-
1.    Under Foreign Account Tax Compliance Act (FATCA) regulation every individual being US Citizens ; Green Card Holders  and resident of USA are
required to 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.
For individual tax-payers living abroad these limits are raised to US$ 200,000 and US$ 300,000 respectively and US$ 400,000 and US$ 600,000 for a
married couple filing joint return.
2.    Foreign Financial Account includes all accounts maintained with a financial institutions whcih are covered under FBAR and in addition to that
it also covers interest in foreign partnership or trusts ; foreign estate; foreign retirement plan and foreign-issued insurance contract etc.
3.    FATCA covers  investments of any and every size in equity shares of a private limited company, capital in partnership or proprietorship, loans and
advances including personal loans etc. Immovable properties are excluded.
4.    FATCA is to be submitted in Form 8938 with the IRS with the tax return and the due dates for filing tax returns with the IRS including extension
will apply accordingly. Failure to file Form 8938 by the due date or filing an incomplete form attracts penalty of $10,000.
5.    The link to IRS website is :-
http://www.irs.gov/Businesses/Corporations/Foreign-Account-Tax-Compliance-Act-FATCA

IV.    PASSIVE FOREIGN INVESTMENT COMPANY (PFIC):

1.  A US citizen and / or US resident is required to pay tax on passive investments as income at normal rates.
2.   Income from passive investments will  include capital gains; dividend; interest etc.
3.   PFIC rules have an option of computation and payment of tax on notional income i.e. Net Asset Value (NAV) as at the end of the year.

4.  IRS Weblink:PFIC form link -
http://www.irs.gov/pub/irs-pdf/f8621.pdf   whereas PFIC instructions can be viewed at http://www.irs.gov/instructions/i8621/ch01.html

We hope the contents are found useful and  will be happy to provide assistance in case of doubts but it would be appropriate that  a professional CPA or the IRS is contacted for specific clarifications .
 

with regards ,
sincerely ,
 
RAJESH H DHRUVA
Chief Executive
femaonline.com
Tel. No. : 0091 281 245 3367 (four lines) / 245 9613
Cell : 0091 98240 49944
email  rajesh@femaonline.com ; keynote@nribanks.com

 

 
 

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GLOBAL FINANCIAL INSTITUTIONS TO PROVIDE INFORMATION TO IRS

Ensuring tax compliance and establishing tax discipline is the basic objective of law makers and for some unexplained reasons jumping the tax payments is many tax payers’ delight across the world. Eventually when law enforcers realize the weakness of the stick, they offer carrots of amnesty schemes now and then and the United States of America is no exception.

In 2009 and 2011 the Internal Revenue Service (IRS) offered schemes of Overseas Voluntary Disclosure Initiatives (OVDI) for tax defaulters to come clean paying taxes on their hitherto undisclosed foreign income and also to adhere to the requirements of yearly disclosure of foreign financial assets under the Foreign Bank Account Reporting (FBAR). Having received a lukewarm response to the OVDI IRS introduced Overseas Voluntary Disclosure Programme (OVDP) which is presently open. Apart from this, Foreign Assets Tax Compliance Act (FATCA) has become effective from the year 2011.

Under FATCA tax payers who are US citizens, Green Card holders or resident aliens are required to declare their foreign financial assets to the IRS. However, through FATCA the US law makers have, probably for the first time in the history of taxation, also sought to stretch the geographical limits of the IRS jurisdiction to almost all the nations across the globe and the responsibility of collecting taxpayer’s information is cast on global institutions.

No doubt, Double Tax Treaties grant abundant rights to Tax Authorities to seek tax payer’s information, but FATCA turns the tables by entrusting the responsibility of collecting and providing information as regarding financial affairs of all US citizens and US address accounts on banks, mutual funds, insurance companies, broking houses and other financial institutions across the world thereby tightening the IRS grip to control possible tax evasion.

[http://www.treasury.gov/press-center/press-releases/Pages/tg1759.aspx]

Effective 1st January 2014 many Non Resident Indians of USA who by ignorance or otherwise have failed to submit FBAR and FATCA reports or declare Indian income in US tax returns may have nightmares. It would therefore be prudent for every NRI to understand and address these important changes being implemented next year. The most innocent mistake NRIs residing in US tend to make is non-declaration of their Indian assets owned prior to migration and financial assets inherited or received through partition of family which are otherwise covered by reporting requirements of FBAR and FATCA and non-payment of tax on income generated out of such assets

GLOBAL INCOME OF US PERSONS BEING TAXED IN USA :
Internal Revenue Code (IRC) requires a US citizen or resident of USA to declare and pay income tax on worldwide income irrespective of his place of residence. Of course taxpayers having income in India can choose between the IRC and the regulations of India USA Double Tax Treaty for income arising in India and opt to be governed by the provisions of either as is found more beneficial to him, subject to conditions as may be applicable

USA ENGAGING WITH INDIA FOR COMPLIANCE  :

US Treasury has initiated signing of agreements with various Governments requiring domestic financial institutions operating in their country to provide requisite information for calendar year 2013 of all US citizens and US addressee customers to IRS from 1st January, 2014. While Governments of UK, Denmark and Mexico have already signed such agreement, France, Germany, Spain, and Italy are in the process of concluding the agreement and efforts are undertaken for similar agreements with many other countries.

 

As posted in US Embassy report, US Treasury Secretary Mr. Timothy Geithner and US Fed Chairman Mr. Ben Bernanke met the Finance Minister of India and the Prime Minister of India on the 9th October, 2012 and discussed various options and possible actions for combating tax evasion by US based NRIs.[http://newdelhi.usembassy.gov/sr100913.html].

As a consequence, reportedly Reserve Bank of India has been asked to draft a domestic legislation requiring Indian banks, mutual funds, insurance companies, broking houses and other financial institutions to provide   information of investments of US citizens and US addressees to the IRS from 1st January, 2014. [http://articles.economictimes.indiatimes.com/2012-11-27/news/35385827_1_financial-assets-fatca-financial-institutions ]

To take an overview of the subject, salient features of the FBAR, FATCA and taxability of global income under USA tax laws are briefly discussed below.

FOREIGN BANK ACCOUNT REPORT (FBAR) :

FBAR is an acronym for the Foreign Bank Account Report. It is a simple form to collect basic information of US citizens or US residents of their overseas financial accounts in their names or wherein they have signing authority or control.

Applicability:  The FBAR  is required to be filed by  a person who is a US citizen, resident of USA, a USA partnership firm, a Limited Liability Company (LLC) or trust (referred as United States Person) which has financial interest or signing authority in overseas financial investment exceeding US $ 10,000  during a calendar year. It may be noted that filing of tax returns jointly by a married couple is common in USA but  the limit of US $ 10,000 is for each individual.

Foreign Financial Account: It includes all accounts maintained with a financial institution and also includes:

  • Securities or brokerage account;
  • Bank account including savings, current or deposits held as NRE, NRO, FCNR account and also Resident account.
  • Commodity Futures & Options Accounts;
  • Whole life insurance policy and any annuity with cash value; Mutual fund or similar pooled fund and
  • Any account maintained with a foreign financial institution or other person performing the services of a financial institution.

It may be noted that investment in a partnership or proprietorship firm, private limited company, personal loans and personal assets like jewellery are not included and hence not required to be reported. Immovable properties are also not covered under FBAR but bank balances generated by funds remitted for purchase of Immovable property in India need to be reported.

Financial Interest: A United States person is said to have a financial interest in a foreign financial account if:

• He is the owner of record or holder of legal title, or

• The owner of record or holder of legal title is another person who may be:

a)       an agent, nominee, attorney or a person acting in on behalf of the US person with respect to the account;

b)       a corporation / company in which the US person owns directly or indirectly more than 50 percent of the total value of shares or voting power;

c)        a partnership in which the US person owns directly or indirectly or has interest greater  than 50 percent of the profits or capital;

d)       a trust of which the US person is the trust grantor and has an ownership interest in the trust for US federal tax purposes;

e)       a trust in which the US person has a more than 50 percent beneficial interest in the assets or income of the trust for the calendar year; or

any other entity in which the US person owns directly or indirectly more than  50 percent of the voting power or total value of equity interest or total assets or interest in profits.  

Joint Owners: A husband and wife owning a joint account need not file separate reports. But if either spouse has a financial interest in any other account not held jointly then such a person should file a separate report for all accounts including those owned jointly with the spouse.

Form and Filing:  The report is to be submitted in form TD F 90-22.1 with the U.S. Department of the Treasury, Detroit by June 30 of the following year.

Penalty:  Improper filing of FBAR attracts penalty of $10,000 whereas wilful failure to file FBAR is liable to penalty of greater of $100,000 or 50% of the balance at the time of violation and also is subjected to criminal penalties.

FOREIGN ACCOUNT TAX COMPLIANCE ACT (FATCA) :

FATCA, an acronym for Foreign Account Tax Compliance Act (FATCA) enacted with the primary goal to gain information about US persons and requires US persons to report their foreign financial assets to the IRS and also requires foreign financial institutions to report directly to the IRS details of financial accounts of US persons held with them.

Applicability:  Individuals who are U.S. citizens, tax residents, non-residents who elect to be resident aliens and non-residents who are bonafide residents of American Samoa or Puerto Rico having foreign financial assets above the threshold limit.

Foreign Financial Assets: It includes following financial assets:

  • Checking, savings and deposit accounts with banks held as NRE, NRO, FCNR or Resident accounts ;
  • Brokerage accounts held with brokers & dealers;
  • Stocks or securities issued by a foreign corporation;
  • Note, bond or debenture issued by a foreign person;
  • Swaps of all kinds including interest rate, currency, equity, index, commodity and similar agreements with a foreign counterparty;
  • Options or other derivative instruments of any currency, commodity or any other kind that is entered into with a foreign counterparty or issuer;
  • Partnership interest in a foreign partnership;
  • Interest in a foreign retirement plan or deferred compensation plan;
  • Interest in a foreign estate;
  • Any interest in a foreign-issued insurance contract or annuity with a cash-surrender value; and
  • Any account maintained with a foreign financial institution and every foreign financial asset, income or gain whereof is to be reported in the tax return to be filed with the IRS.

It is significant to note that unlike FBAR, FATCA covers  investments of any and every size in equity shares of a private limited company, capital in partnership or proprietorship, loans and advances including personal loans etc. Immovable properties are excluded. If the US person is not required to file US tax return for any reason then he is not required to file the FATCA report.

Both FBAR and FATCA cover erstwhile investments in India and inherited or partitioned family assets.

Reporting Threshold: Individuals are covered by FATCA 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.

For individual tax-payers living abroad these limits are raised to US$ 200,000 and US$ 300,000 respectively and US$ 400,000 and US$ 600,000 for a married couple filing joint return.

Joint Owners: As the report is filed with IRS tax return, tax return of a married couple will include assets of both the spouses.

Form and Filing:  The report is to be submitted in form 8938 with the IRS with the tax return and the due dates for filing tax returns with the IRS including extension will apply accordingly.

Penalty: Failure to file Form 8938 by the due date or filing an incomplete form attracts penalty of $10,000. Additional penalty of $10,000 per month up to a maximum penalty of $ 50,000 may become payable for failure to file inspite of IRS notice.

Tax Withholding:   FATCA also requires 30 percent tax withholding on certain payments of US source income paid to non participating foreign financial institution or account holders who fail to provide requisite information. [http://www.irs.gov/uac/Treasury,-IRS-Issue-Proposed-Regulations-for-FATCA-Implementation]

U.S. OFFSHORE VOLUNTARY DISCLOSURE PROGRAMME 

The IRS has once again given an opportunity for voluntary disclosure of overseas assets and income thereon under the Offshore Voluntary Disclosure Programme (OVDP).

The OVDP is similar to the earlier OVDI under which tax-payers are required to pay tax on hitherto undisclosed income of earlier eight  tax years together with interest thereon and in addition a penalty of 27.5% of the highest balance of hitherto undisclosed foreign bank accounts and / or value of foreign assets over the last 8 years. For balance upto $ 75,000 reduced penalty of 12.5% applies. In cases of tax payers disclosing and paying tax on foreign incomes but failing only to file FBAR returns delinquent reports may be filed possibly saving oneself from penal provisions. [http://www.irs.gov/uac/2012-Offshore-Voluntary-Disclosure-Program]

Many NRIs may not have abided by the FBAR provisions and few by ignorance have also failed to pay tax on their Indian income in the USA but ignorance of law cannot be an excuse and therefore it would be appropriate  for USA based NRIs and Chartered Accountants advising them to take advantage of the OVDP before the programme is discontinued.

with regards ,
sincerely ,

RAJESH H DHRUVA
Chief Executive
femaonline.com 
ph ; (91 281 ) 2453367 ( four lines)
rajesh@femaonline.com ; councelor@nribanks.com
 


 

USA IRS - ONLY 5% PENALTY FOR OVERSEAS UNDECLARED INCOME & ASSETS

INDIAN BANKs : MFs ; INSURANCE COs. & BROKERAGEs registered under FATCA of USA

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