anmi fatca crs - may 2016

8/17/2019 Anmi Fatca Crs - May 2016

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ANMI

Discussion on applicability of FATCA / CRS

May 2016


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Key aspects of the FATCA / CRS regulations

IMPORTANT DEFINITIONS


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Custodial Institution

• Any entity that holds , as a substantial portion of its business, f inancial assets for the account of others;• Substantial portion - Income attributable to the holding of financial assets and related financial services >= 20%

3 financial years preceding the year in which determination is made or the period during which the entity has been in existence, less.

• Entities that safe keep financial assets for the account of others, such as custodian banks, brokers and central securities depositowould generally be considered Custodial Institutions

Investment Entity

Test Explanation

Trading Test

Met if an entity is engaged in Trading in money market instruments; foreign exchange; exchange, interesinstruments; transferable securities; or commodity futures trading; or Individual and collective portfolio mOtherwise investing, administering, or managing financial assets or money on behalf of other persons

Managed by TestMet if the entity is managed by, or the financial assets are managed by, another FFI that is a depositoinstitution, specified insurance company or Class A investment entity


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• Financial Accounts (‘FA’) to include the following:

• A Custodial Account- An account (other than an insurance contract or annuity contract), for the benefit of another person, that holds one or mo

assets

• An equity or debt interest in an Investment Entity- FI being a partnership firm - Interest either in capital or profits- FI being a trust - Any interest held by any person treated as a settlor or beneficiary of all or a portion of the trust, or any o

person exercising ultimate effective control over the trust.- A person will be treated as a beneficiary of a trust if he has the right to receive directly or indirectly a mandatory distrib

receive, directly or indirectly, a discretionary distribution from the trust


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OTHER RELEVANT EXTRACTS

• OECD Commentary page 160

• Incomes attributable to holding Financial Assets and related financial services

FATCA CRS

Includes fees for providing financial advice with respect to financialassets held in custody by the entity

Custody, account maintenance, and transfer fees; comfees earned from executing and pricing securities tranIncome earned from extending credit to customersfinancial assets held in custody by the entity (or such extension of credit); income earned on the bid-afinancial assets held in custody; andFees for providing financial advice with respect to finheld in (or potentially to be held in) custody by the enclearance and settlement services


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PRODUCTS IMPACTED

Broker and DP Portfolio Manager

CustodialInstitution

InvestmentEntity

InvestmentEntity

BrokingDepositoryParticipant PMS

Products


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IMPORTANT DEFINITIONSFinancial Institutions With Local Client BaseConditions for FI:• Granted a license/regulated under any law;• No fixed place of business outside India;• Does not solicit customers/account holders outside India;• Identify resident account holders for either information reporting or withholding of tax with respect to FA held by residents or for

the due diligence requirements under PMLA;• At least 98% of the financial accounts (value) held by residents;• Policies/procedures are consistent with Rule 114 H, preventing FI from providing FA to any non-participating FI and monitor whe

maintains FA of any reportable person who is not resident in India or any Passive Non-Financial entity;• If any non resident reportable account or a passive non-financial entity is identified, FI shall report such FA as if FI was a reportin

such FA;• In case of pre-existing account of an individual not resident in India, FI to review account as per Rule 114H to identify if it is repo

account or FA held by a non-participating FI and report such account as required;• Each related entity of Financial Institution must be incorporated or organised in India;• Must not have policies/practices which discriminate against opening or maintaining FAs for individuals who are specified U.S. pe

residents of IndiaDue Diligence – a must exercise


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FATCA vs CRS

Key Requirements FATCA CRS

Registration Required? • Yes, with IRS unless exempt or certified deemedcompliant to obtain GIIN

• On Income-tax e-filing portal to obtain ITDREIN

• Common ITDREIN for

“Responsible officer” required? • Yes – to effect registration and act as a point of

contact for IRS queries in relation to registration only• No

What is a:•

pre-existing account?• new account?

• Accounts open on 30 June 2014• New accounts opened from 1 July 2014

• Accounts open on 31 D• New accounts opened f

Do minimum thresholds for being afinancial account for diligence andreporting purposes apply?

• $50,000 for individual custodial accounts• $250,000 for entity custodial accounts

• No minimum threshold$250,000 that applies faccounts


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APPLICABILITY OF FATCA / CRS?

CLASSIFICATION


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BROKING AND DPBroker / DP

InvestmentEntityCustodial

Institution

20% or more ofgross income


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PMS

Non-PoolAccount

PoolAccount

Managing financial assets onbehalf of others

Depositedwith?

NPFFI

CustodialInstitution

20% or more ofgross income


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REGISTRATION REQUIREMENT


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REGISTRATION REQUIREMENT

• FATCA:

Required to register with the US IRS to obtain GIIN; and

Also required to register with the Income-tax department to obtain ITDREIN

• CRS:

No registration requirements;

However, already registered with the Income-tax department under FATCA

• What if the activities undertaken by the broker is restricted to the extent of rendering investment advice, managing portfolio and trades for and on behalf of customer that maintain their account with a Participating Financial Institution?

Non-Reporting Financial Institution for FATCA purposes and therefore, no registration requirements;No specific exception under CRS regulations. However, common exception under the guidance note issued by Income-tax fimplementation of FATCA / CRS.

Broker may have to carry out due diligence with the financial institution of its customers


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TIMELINES


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TIMELINES– PRE-EXISTING ACCOUNTS

Account Type ReportableAccount

Threshold Limit Account OpeningPeriod

Due Diligencetimelines – on

/ before

FormRepo

Individual Accounts

U S ReportableAccount

If > USD 50,000 High Value Accounts > USD 1million

Upto 30 June 2014 31 December2015

31 M

Low Value Accounts betweenUSD 50,000 to USD 1 million

30 June 2016 31 M

Other ReportableAccount

All Accounts High Value Accounts > USD 1million

Upto 31 December2015

30-June 2016 31 M

Low Value Accounts < USD 1million

30 June 2017 31 Ma

Entity Accounts

U S ReportableAccount Aggregate Account Balance or value > USD

2,50,000

Upto30 June 2014 30 June 2016 31 M


Upto 31 December2015


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TIMELINES– NEW ACCOUNTS

Account Type Reportable Account Period Due Diligence date Form 61B Reportingdate

U S ReportableAccount

All Accounts 01 July 2014 to 31December 2014

Account Opening (or) 90days from end ofcalendar year

10 Septembe

01 January 2015 to 31August 2015

31 May 201Alternate pro

01 September 2015 to31 December 2015


All accounts – Nothreshold

From 01 January 2016 Account opening 31 May 2017


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WAY FORWARD –

WHAT TO BE REPORTED


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WHAT IS TO BE REPORTED

• Key fields; and

• Declarations

WHAT IF NO RESPONSE FROM ACCOUNT HOLDERS

• Restrict transactions immediately;

• Closure of account – On non-receipt of the declarations within required time;

• The above account may be reported.


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MANAGE / GENERATE ITDREIN

Follow the below mentioned steps for generating ITDREIN:

• Login to e-Filing portal using User ID, e-Filing Password and DOB;• Go to My Account > Manage ITDREIN;

• To generate new ITDREIN click on the button “Generate New ITDREIN”;

• A Pop up with Form Type and Reporting Entity Category is displayed. Select the Form Type (Select Form 61BReporting Entity Category from the drop down;

• Based on the Form Type and Reporting Entity Category selected, the ITDREIN will be generated and the user to upload and view the corresponding Form;

• Click Generate ITDREIN button;

• Success Message is displayed, User receives a confirmation e-mail on successful generation of ITDREIN to thEmail ID. SMS is also sent to the registered Mobile number; and

• On Successful Generation of ITDREIN, the success screen would be displayed.


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ADDING AN AUTHORISED PERSON

Follow the below mentioned steps for adding the Authorised Person:

• Login to e-Filing portal using User ID, e-Filing Password and DOB;• Go to My Account > Manage ITDREIN;

• To add Authorised Person for the generated ITDREIN, click on the link provided in the ITDREIN Column;

• Click on the button Add Authorised Person;

• A Pop up with the required details appears on the screen. Please find enclosed the screenshot in the next slide;

• Enter all the details and click on Add Authorised Person;

• A confirmation email on successful Addition of Authorised Person on the registered email id;

• Confirmation email with an activation link shall be sent on the Authorised Persons email id along with an OTPSMS;

• The Authorised person shall be required to click on the Activation link and enter the PIN and password and copassword.


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ADDING AN AUTHORISED PERSON


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THANK YOU

Kriyang KariaAssociate DirectorBDO INDIA LLPDirect: +91 22 2439 3651Mobile: +91 98330 [email protected]

anmi fatca crs - may 2016

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