United States and India Sign Agreement to Share Tax Information
U.S. Ambassador to India Mr. Richard Verma and Indian Revenue Secretary Mr.Shaktikanta Das signed an Inter Governmental Agreement (IGA) to implement the Foreign Account Tax Compliance Act (FATCA) to promote transparency between the two nations on tax matters.
Legal Corner Icon — the image was hosted by the publisher and was not captured.Revenue Secretary, Shaktikanta Das said, "Signing the IGA with U.S. to implement FATCA today, is a very important step for the Government of India, to tackle offshore tax evasion. It reaffirms the Government of India's commitment to fight the menace of black money. It is hoped that the exchange of information on automatic basis, regarding offshore accounts under FATCA would deter tax offenders, would enhance tax transparency and eventually bring in higher equity into the direct tax regime which is necessary for a healthy economy."
Ambassador Verma, said, "The signing of this agreement is an important step forward in the collaboration between the United States and India to combat tax evasion. FATCA is an important part of the U.S. Government's effort to address that issue."
The United States enacted FATCA in 2010 to obtain information on accounts held by U.S. taxpayers in other countries. It requires U.S. financial institutions to withhold a portion of payments made to foreign financial institutions (FFIs) who do not agree to identify and report information on U.S. account holders. As per the IGA, FFIs in India will be required to report tax information about U.S. account holders directly to the Indian Government which will, in turn, relay that information to the IRS. The IRS will provide similar information about Indian account holders in the United States. This automatic exchange of information is scheduled to begin on 30th September, 2015.
Whereas:
• The Government of India is supportive of the underlying policy goal of FATCA to improve tax compliance;
• FATCA has raised a number of issues, including that Indian financial institutions may not be able to comply with certain aspects of FATCA due to domestic legal impediments;
• The Government of the United States of America collects information regarding certain accounts maintained by U.S. financial institutions held by residents of India and is committed to exchanging such information with the Government of India and pursuing equivalent levels of exchange;
• The Parties are committed to working together over the longer term towards achieving common reporting and due diligence standards for financial institutions;
• The Government of the United States of America acknowledges the need to coordinate the reporting obligations under FATCA with other U.S. tax reporting obligations of Indian financial institutions to avoid duplicative reporting;
• An intergovernmental approach to FATCA implementation would address legal impediments and reduce burdens for Indian financial institutions;
• The Parties desire to conclude an agreement to improve international tax compliance and provide for the implementation of FATCA based on domestic reporting and reciprocal automatic exchange pursuant to the Convention, and subject to the confidentiality and other protections provided for therein, including the provisions limiting the use of the information exchanged under the Convention;
the Parties have entered into the agreement.
The information to be obtained and exchanged is:
a) In the case of India with respect to each U.S. Reportable Account of each Reporting Indian Financial Institution:
(1) the name, address, and U.S. TIN of each Specified U.S. Person that is an Account Holder of such account and, in the case of a Non-U.S. Entity that, after application of the due diligence procedures set forth in Annex I, is identified as having one or more Controlling Persons that is a Specified U.S. Person, the name, address, and U.S. TIN (if any) of such entity and each such Specified U.S. Person;
(2) the account number (or functional equivalent in the absence of an account number);
(3) the name and identifying number of the Reporting Indian Financial Institution;
(4) the account balance or value (including, in the case of a Cash Value Insurance Contract or Annuity Contract, the Cash Value or surrender value) as of the end of the relevant calendar year or other appropriate reporting period or, if the account was closed during such year, immediately before closure;
(5) in the case of any Custodial Account:
(A) the total gross amount of interest, the total gross amount of dividends, and the total gross amount of other income generated with respect to the assets held in the account, in each case paid or credited to the account (or with respect to the account) during the calendar year or other appropriate reporting period; and
(B) the total gross proceeds from the sale or redemption of property paid or credited to the account during the calendar year or other appropriate reporting period with respect to which the Reporting Indian Financial Institution acted as a custodian, broker, nominee, or otherwise as an agent for the Account Holder;
(6) in the case of any Depository Account, the total gross amount of interest paid or credited to the account during the calendar year or other appropriate reporting period; and
(7) in the case of any account not described in subparagraph 2(a)(5) or 2(a)(6) of this Article, the total gross amount paid or credited to the Account Holder with respect to the account during the calendar year or other appropriate reporting period with respect to which the Reporting Indian Financial Institution is the obligor or debtor, including the aggregate amount of any redemption payments made to the Account Holder during the calendar year or other appropriate reporting period.
b) In the case of the United States, with respect to each Indian Reportable Account of each Reporting U.S. Financial Institution:
(1) the name, address, and Indian TIN of any person that is a resident of India and is an Account Holder of the account;
(2) the account number (or the functional equivalent in the absence of an account number);
(3) the name and identifying number of the Reporting U.S. Financial Institution;
(4) the gross amount of interest paid on a Depository Account;
(5) the gross amount of U.S. source dividends paid or credited to the account; and
(6) the gross amount of other U.S. source income paid or credited to the account, to the extent subject to reporting under chapter 3 of subtitle A or chapter 61 of subtitle F of the U.S. Internal Revenue Code.
Either Party may terminate this Agreement by giving notice of termination in writing to the other Party. Such termination shall become effective on the first day of the month following the expiration of a period of 12 months after the date of the notice of termination.