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ANMI

Discussion on applicability of FATCA / CRS

May 2016

Key aspects of the FATCA / CRS regulations


IMPORTANT DEFINITIONS

IMPORTANT DEFINITIONS
Custodial Institution
Any entity that holds, as a substantial portion of its business, financial assets for the account of others;
Substantial portion - Income attributable to the holding of financial assets and related financial services >= 20% of its gross income during
3 financial years preceding the year in which determination is made or the period during which the entity has been in existence, whichever is
less.

Entities that safe keep financial assets for the account of others, such as custodian banks, brokers and central securities depositories,
would 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, interest rate and index
instruments; transferable securities; or commodity futures trading; or Individual and collective portfolio management; or
Otherwise investing, administering, or managing financial assets or money on behalf of other persons

Managed by Test

Met if the entity is managed by, or the financial assets are managed by, another FFI that is a depository or custodial
institution, specified insurance company or Class A investment entity

IMPORTANT DEFINITIONS

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 more financial
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 other natural
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 distribution or may
receive, directly or indirectly, a discretionary distribution from the trust

OTHER RELEVANT EXTRACTS

OECD Commentary page 160

Incomes attributable to holding Financial Assets and related financial services


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

CRS
Custody, account maintenance, and transfer fees; commissions and
fees earned from executing and pricing securities transactions;
Income earned from extending credit to customers with respect to
financial assets held in custody by the entity (or acquired through
such extension of credit); income earned on the bid-ask spread of
financial assets held in custody; and
Fees for providing financial advice with respect to financial assets
held in (or potentially to be held in) custody by the entity; and for
clearance and settlement services

PRODUCTS IMPACTED
Products

Broker and DP

Portfolio Manager

Custodial
Institution

Investment
Entity

Investment
Entity

Depository
Participant

Broking

PMS

IMPORTANT DEFINITIONS
Financial Institutions With Local Client Base
Conditions 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 satisfying
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 whether FI
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 reporting FI or close
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 reportable
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. persons and
residents of India

Due Diligence a must exercise

FATCA vs CRS
Key Requirements
Registration Required?

Responsible officer required?

What is a:

pre-existing account?

new account?

Do minimum thresholds for being a


financial account for diligence and
reporting purposes apply?

FATCA

Yes, with IRS unless exempt or certified deemed


compliant to obtain GIIN

CRS

Common ITDREIN for both FATCA and CRS

On Income-tax e-filing portal to obtain ITDREIN

Yes to effect registration and act as a point of

contact for IRS queries in relation to registration only

No

Accounts open on 30 June 2014

Accounts open on 31 December 2015

New accounts opened from 1 July 2014

New accounts opened from 1 January 2016

$50,000 for individual custodial accounts

$250,000 for entity custodial accounts

No minimum thresholds apply, except


$250,000 that applies for pre-existing entity
accounts

APPLICABILITY OF FATCA / CRS?


CLASSIFICATION

BROKING AND DP

Broker / DP

Custodial
Institution

Investment
Entity

Income attributable to holding


Financial Assets

No

20% or more of
gross income

<20% of gross
income

Registration

Not an FI : Non Reporting

Holds Financial
Account?

Exempt

Yes

Trading on behalf of others

Deposited
with?

NPFFI

PFFI

Local Client base


Yes
Non Reporting

No

Exempt
Reporting

PMS

No

PMS

Pool
Account

Non-Pool
Account

Custodial
Institution

Investment
Entity

Income attributable to holding


Financial Assets

Managing financial assets on


behalf of others

20% or more of
gross income

<20% of gross
income

Registration

Not an FI : Non Reporting

Holds Financial
Account?

Exempt

NPFFI

PFFI

Yes

Local Client base


Yes
Non Reporting

Deposited
with?

No
Reporting

Exempt

REGISTRATION REQUIREMENT

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 executing
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 for the
implementation of FATCA / CRS.

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

TIMELINES

TIMELINES PRE-EXISTING ACCOUNTS


Account Type

Reportable
Account

Threshold Limit

Account Opening
Period

Due Diligence
timelines on
/ before

Form 61B
Reporting date

If > USD 50,000

High Value Accounts > USD 1


million

Upto 30 June 2014

31 December
2015

31 May 2016

30 June 2016

31 May 2017

30-June 2016

31 May 2017

30 June 2017

31 May 2018

30 June 2016

31 May 2017

Individual Accounts
U S Reportable
Account

Low Value Accounts between


USD 50,000 to USD 1 million
Other Reportable
Account

All Accounts

High Value Accounts > USD 1


million

Upto 31 December
2015

Low Value Accounts < USD 1


million

Entity Accounts
U S Reportable
Account
Other Reportable
Account

Upto30 June 2014


Aggregate Account Balance or value > USD
2,50,000

Upto 31 December
2015

TIMELINES NEW ACCOUNTS


Account Type

Reportable Account

Period

Due Diligence date

Form 61B Reporting


date

U S Reportable
Account

All Accounts

01 July 2014 to 31
December 2014

Account Opening (or) 90


days from end of
calendar year

10 September 2015

Account opening

31 May 2017

01 January 2015 to 31
August 2015

31 May 2016 Exception


Alternate procedures

01 September 2015 to
31 December 2015

Other Reportable
Account

All accounts No
threshold

From 01 January 2016

WAY FORWARD
WHAT TO BE REPORTED

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.

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 61B) and
Reporting Entity Category from the drop down;
Based on the Form Type and Reporting Entity Category selected, the ITDREIN will be generated and the user will be able
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 the registered
Email ID. SMS is also sent to the registered Mobile number; and

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

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 OTP through
SMS;
The Authorised person shall be required to click on the Activation link and enter the PIN and password and confirm the
password.

ADDING AN AUTHORISED PERSON

THANK YOU
Kriyang Karia
Associate Director
BDO INDIA LLP
Direct: +91 22 2439 3651
Mobile: +91 98330 06952
kriyangkaria@bdo.in