SEBI to release FATCA compliance norms in the fiscal year 2014-15
SEBI announced on 25 March 2014 to release the Foreign Account Tax Compliance Act (FATCA) compliance norms in the fiscal year 2014-15.
SEBI announced on 25 March 2014 to release the Foreign Account Tax Compliance Act (FATCA) compliance norms in the fiscal year 2014-15. The FATCA compliance norms will help combat possible tax evasion by Americans through Indian entities.
FATCA is a law that aims to check and impose withholding tax on illicit activities of some wealthy individuals who use offshore accounts to evade millions of dollars in taxes.
For the implementation of the FATCA, the US government is required to sign IGAs with various countries, including India. The US has so far signed IGAs with 22 countries including the UK and Switzerland.
At present, the negotiation is going on between the India and US for an Inter- government agreement (IGA) to be signed between the two countries under the FATCA.
Once this new Act and the Indo-US IGA come into effect, all financial institutions in India would need to carry out a detailed due diligence on all their clients and report details of their US clients to the US tax department.
Any non-compliance of the FATCA provisions would result in penal withholding of 30% of the total US-source income of such financial institutions.
In India, SEBI was asked to examine the applicability of the FATCA provisions to all market intermediaries regulated by the capital markets regulator. This was examined by SEBI in coordination with the finance ministry.
FATCA became a law in 2010, the final regulations were issued for it in January 2013 and it is set to come into effect from 1 July 2014, after signing of IGAs with different countries.
FATCA has emerged as a global standard for detecting offshore tax evasion, as countries from across the world, including India, step up their vigil for details about foreign assets of their own individuals and companies.