India gets extra month to sign US law on exchange of financial information

Acc to the Act, countries are required to sign agreement with the US for sharing of info related to US individuals & co.

By: ENS Economic Bureau | New Delhi | Published: December 27, 2014 1:53 am

India has got one more month to sign the Foreign Account Tax Compliance Act (FATCA), a US law that mandates foreign financial institutions to exchange information about its taxpayers with its authorities.

“The US has given a month’s extension to India and some other counties to sign the FATCA. The finance ministry will seek the Cabinet nod before going ahead and signing the FATCA,” Shaktikanta Das, revenue secretary, said at an event here. The original deadline set by the US for signing it was December 31.

According to the Act, countries are required to sign agreement with the US for sharing of information related to American individuals and companies. The non-compliance with the FATCA would lead to a 30 per cent withholding tax on the US source payments. The law mandates that the exchange of information would be subject to a confidentiality clause.

This was a cause of concerns to the Indian authorities given the Supreme Court’s insistence on disclosing the names on the HSBC list which was received by India from France under a tax treaty that mandates confidentiality.

Following the instructions, the government had approached the court to get clarity on the confidentiality clause before signing the FATCA. The SC had then asked the special investigation team (SIT) on black money to take a call on the matter. The SIT has given a go-ahead to the government.

For all the latest Business News, download Indian Express App

  1. J
    JC
    Dec 29, 2014 at 3:32 am
    Does India know what an IGA Agreement is? Background: :tiny.cc/FATCAINDIAThe Indian Supreme Court should also concern itself with any Indian privacy and discrimination laws that the US is about to force India to revise to meet the US reporting requirements of FATCA Canada there is a lawsuit likely to reach the Canadian Supreme Court that the Candian FATCA IGA is in contravention of the Canadian Charter of Rights prohibiting discrimination based on national origin. See: Alliance for the Defence of Canadian Sovereignty the US a lawsuit is getting started by fatcalegalaction, likely to lead to the US Supreme Court that FATCA is in violation ot the US Consution with unreasonable search and seizure and excessive fines claims. Plus, as the IGA agreements are international treaties, they must be reviewed and approved by the US Senate - which the Obama administration has byped.The Financial Express may find a wealth of content by doing a little research into the controversy of FATCA. How about expense. FATCA requires each country of the world into due diligence to see if any account holders new and existing are US persons, and then to report this information to the US IRS. This is not trivial. It will require changes in IT systems and account information fields. One estimate is that it will cost the financial insutions of the world $200 billion to implement. How much will it cost Indian banks? Who will pay for this? Answer: all Indian bank customers will pay as the costs will need to be covered by higher bank fees for everyone.What is in it for India? The US will make a vague pledge of reciprocity to report to India any US account information for which an Indian resident is a beneficiary. The US is now not asking or has plans to ask for citizenship information of ALL their account holders. The OECD has a nice information exchange program as well (inspired by FATCA). The US has not signed up for the OECD plan and will 'partite through FATCA.' In review, FATCA is only about "foreign countries" handing over to the US all account information on US citizens and Green Card Holders.The US is different than India in that it has a citizenship based tax law, while India an all other OECD countries have residency based tax laws. Here is how Indians will get hurt: Let's take an Indian who has no money in the US but who is resident in India with US citizenship or a Green Card. They pay all the tax on their earnings and ets to India. But wait there is more. As they are US persons, the US wants them to file US tax returns. There is an India-US Tax Treaty that helps reduce any double taxation, yet the US has taxes that India does not and these flow right on top for double taxation. FATCA will now be an enforcement mechanism against resident Indians.The US will want to tax extra any Indian mutual funds, retirement funds, trusts, and so called Pive Foreign Investment Companies. Note the word "Foreign" as in the description for Indian accounts and ets. If these are not reported right there are very serious fines such as 50% of an account value - as the US laws treat these two types of accounts the same: accounts of a New Yorker set up in the Cayman Islands with the intent of tax evasion and, an account of a resident Indian set up to receive ones paycheck and pay the bills.This is what India could insist on: (1) the IGA treaty would have to be reviewed and approved by the US Senate for it to be considered law in India, (2) India requires that the US pays for implementation costs of financial insutions in India, (3) India will provide the information but only at the same time as the US provides identical information to India, (4) India would not allow any agreement that calls banks within India “Foreign Financial Insutions.”
    (0)(0)
    Reply
    1. J
      JC
      Dec 27, 2014 at 4:48 am
      India could require that the FATCA IGA be reviewed and approved by the US Senate as is required for international treaties by US law. That would be a reasonable request. Else, India could sign up for and commit its banks to substantial investment to comply then have FATCA be declared unconsutional by the US Supreme Court. FATCA is Unconsutional so says www.fatcalegalactionFor more background on FATCA:This article from The Economist provides an interesting read:FATCA’s flaws: America’s new law on tax compliance is heavy-handed, inequitable and hypocritical:tiny.cc/8zdnlxWikipedia also has useful information.
      (0)(0)
      Reply