Fund houses have to register with US authorities by December 31, 2014 as part of Foreign Accounts Tax Compliance Act (FATCA) regulations.
SEBI has asked fund houses to register with US authorities and obtain a Global Intermediary Identification Number (GIIN) as a part of Foreign Accounts Tax Compliance Act (FATCA) regulations by December 31, 2014.
Enacted in 2010, the legislation is meant to prevent wealthy US individuals who park money overseas to avoid paying taxes. The FATCA rules came into effect in US from July 01.
In its circular, SEBI said that India and the United States of America (US) have reached an agreement in substance on the terms of an Inter- Governmental Agreement (IGA) to implement Foreign Accounts Tax Compliance Act (FATCA).
“This time limit (December 31, 2014) would also be applicable to Indian financial institutions having overseas branches in Model 1 jurisdictions, including those jurisdictions where an agreement under Model 1 has been reached in substance. Registration should be done only after the formal IGA is signed. India is now treated as having an IGA in effect from April 11, 2014,” stated SEBI circular.
Once implemented, fund houses will be required to report information on US investors to US IRS (Internal Revenue Service) through CBDT.
““As far as US retail investors are concerned, they are more likely to invest in US domiciled funds for ease of convenience. Very informed investors, who are traditionally institutional investors, may invest in India domiciled mutual funds.” said Pankaj Sharma, EVP & Head of Risk Management & Business Development, DSP BlackRock Investment Managers.
Fund houses have stopped accepting fresh investments from US residents as a part of FATCA rules since last year.
