CRS stands for Common Reporting Standard. To combat the problem of offshore tax evasion and avoidance and stashing of unaccounted money abroad requiring cooperation amongst tax authorities, the G20 and OECD countries working together developed a Common Reporting Standard (CRS) on Automatic Exchange of Information (AEOI). The CRS on AEOI was presented to G20 Leaders in Brisbane on 16th November, 2014.

The CRS on AEOI requires the financial institutions of the “source” jurisdiction to collectand report information to their tax authorities about account holders “resident”in other countries, such information having to be transmitted “automatically’ onyearly basis. The information to be exchanged relates not only to individuals butalso to shell companies and trusts having beneficial ownership or interest in the“resident” countries. Further, the reporting needs to be done for a wide range offinancial products, by a wide variety of financial institutions including banks,depository institutions, collective investment vehicles and insurance companies.

India has joined Multilateral Competent Authority Agreement (MCAA) on Automatic exchange of Financial Account Information on June 3, 2015. In terms of MCAA, all countries which are signatory to the MCAA, are obliged to exchange wide range of Financial information after collecting the same from Financial Institutional in their country / jurisdiction.

Having signed these agreements, India is bound by the compliance required under FATCA & CRS​

The primary goal of FATCA is to gain information (reporting) about U.S. persons. FATCA would help IRS to:

1.      detect and prevent offshore tax evasion by U.S. persons
2.      identify and collect the appropriate tax from US persons holding financial assets outside the US
3.   Increase transparency for the IRS with respect to U.S. persons that may be investing                 & earning income through non-US financial institutions.

FATCA is far reaching and can impact any U.S. person who is involved in making or receiving payments that fall within the scope of FATCA. While FATCA certainly affects U.S. withholding agents and U.S. multinational companies, the greatest impact will likely be to “Foreign Financial Institutions” (FFIs) which can be an ‘entity’ or a ‘fund’.

All financial institutions globally, including banks, investment funds, distributors, custodians, investment managers, financial advisors, insurance companies and other entities must consider whether they are subject to FATCA. ​

In general, a withholding agent is required to withhold 30% on a withholdable payment made to a Foreign Financial Institution (FFI) or to a Non-Financial Foreign Entity (NFFE), unless the FFI or NFFE meets certain requirements. In addition, an FFI must withhold 30% on any passthru payment it makes to a recalcitrant account holder, as well as to payments it makes to another FFI unless that FFI meets certain requirements.

    1.       Identification of the Account Holder as a U.S. citizen or resident;

    2.       Unambiguous indication of a U.S. place of birth

    3.       Current U.S. mailing or residence address (including a U.S. post office box);

    4.       Current U.S. telephone number

    5.       Standing instructions to transfer funds to an account maintained in the United States

    6.       Currently effective power of attorney or signatory authority granted to a person with a U.S. address; or

   7.  An “in-care-of” or “hold mail” address that is the sole address the Reporting [FATCA Partner]            Financial Institution has on file for the Account Holder.  

If none of the indicia are discovered, and the account is not identified as held by a reportable person, then further action is not required until there is a change in circumstances which results in one or more indicia being associated with the account;

If any of the indicia is discovered, or if there is a subsequent change in circumstances which results in one or more indicia being associated with the account, then the reporting financial institution shall treat the account as a reportable account with respect to each country or territory outside India for which an indicium is identified​. 

​US investors can be identified based basis above 7 US Indicia/parameters​

An FFI is a foreign financial institution, which is any non-U.S. non-individual that:

• Accepts deposits in the ordinary course of a banking or similar business,
• As a substantial portion of its business, holds financial assets for the account of others, or
• Is engaged (or holding itself out as being engaged) primarily in the business of investing, reinvesting, or trading in securities, partnership interests, commodities, or any interest in such securities, partnership interests, or commodities.

What is an Exempt FFI?

Certain Foreign Financial Institutions may be exempt from FATCA. They include:

·         Governments

·         International Organizations

•   Central Banks ​ 

Indian entities can be classified into several categories that are affected by different obligations and requirements. The first step to be undertaken by an Indian entity or its representative is therefore to establish whether the entity is a Financial Institution.

According to rule 114 F inserted in the Income-tax rules,1962 , financial institution” means an entity which falls within any of the following categories

   1.       Custodial Institution

   2.       Depository Institution

   3.       Investment Entity

   4.       Specified Insurance Company

Custodial Institution

Custodial institution” means any entity that holds, as a substantial portion of its business, financial assets for the account of others and where its income attributable to the holding of financial assets and related financial services equals or exceeds twenty per cent. of its gross income during the three financial years preceding the year in which determination is made or the period during which the entity has been in existence, whichever is less;

Depository institution

Depository institution means any entity that accepts deposits in the ordinary course of a banking or similar business

Investment Entity

Investment entity” means any entity,-

(A) that primarily conducts as a business one or more of the following activities or operations for or on behalf of a customer, namely:-

(i)             trading in money market instruments (cheques, bills, certificates of deposit, derivatives, etc.); foreign exchange; exchange, interest rate and index instruments; transferable securities; or commodity futures trading; or

(ii)            individual and collective portfolio management; or

(iii)           otherwise investing, administering, or managing financial assets or money on behalf of other persons; or

(B) the gross income of which is primarily attributable to investing, reinvesting, or trading in financial assets, if the entity is managed by another entity that is a depository institution, a custodial institution, a specified insurance company, or an investment entity mentioned in sub-clause (A) of this clause.

An entity is treated as primarily conducting as a business one or more of the activities described in sub-clause (A) of this clause, or an entity’s gross income is primarily attributable to investing, reinvesting, or trading in financial assets for purposes of sub-clause (B) of this clause, if the entity’s gross income attributable to the relevant activities equals or exceeds fifty per cent. of the gross income of the entity during the shorter ofthe three-year period ending on 31st March of the year preceding the year in which the determination is made or the period during which the entity has been in existence.

Specified Insurance Company

Specified insurance company” means any entity that is an insurance company (or the holding company of an insurance company) that issues, or is obligated to make payments with respect to, a Cash Value Insurance Contract or an Annuity Contract 

a)      Governmental entity, International Organisation or Central Bank

b)   a Treaty Qualified Retirement Fund; a Broad Participation Retirement Fund; a Narrow Participation Retirement Fund; or a Pension Fund of a Governmental entity, International Organization or Central Bank

c)       a non-public fund of the armed forces, Employees’ State Insurance Fund, a gratuity fund or a provident fund;

d)      an entity that is an Indian financial institution only because it is an investment entity

e)      a qualified credit card issuer;

f)       an Investment Advisor or Investment Manager

g)      an exempt collective investment vehicle;

h)      Trustee of Indian Trust

i)        a financial institution with a local client base;

j)        a local bank;

k)      a financial institution with only low-value accounts;

l)        sponsored investment entity and controlled foreign corporation

m)    Sponsored closely held investment vehicle, in case of any U.S. reportable account.​

Below mentioned additional information to be captured.

(i)                  Nationality

(ii)                Place of Birth

(iii)               Tax Identification Number

(iv)              Residence for tax purpose

For new individual and entity customers as of July 1, 2014, assess the presence of U.S. indicia based on data captured in the account opening forms. 

The details of any non-participating FFIs or recalcitrant investors will be reported to the local tax authority.

(i)                A Non-participating FFI is defined as a FFI (Foreign Financial Institution) which does not comply with FATCA.

(ii)               A recalcitrant investor is defined as an investor who does not respond to requests for information or fails to provide sufficient documentations. Such accounts are called recalcitrant accounts.

No, FATCA regulation is applicable to all the holders in the account. If the first holder has the U.S. indicia parameters and the second holder is a non-U.S. person or vice versa, we must collect additional documents from the person with U.S. indicia parameters and reporting would be applicable for all holders who are reportable.

If you are a US citizen or resident or green card holder, please include United States in the foreign country information field along with your US Tax Identification Number while filling up the FATCA / CRS declaration form.

It is mandatory to supply a TIN (Tax Identification No) or functional equivalent if the country in which you are tax resident issues such identifiers. If no TIN is yet available or has not yet been issued, please provide an explanation and attach this to the form.

Yes. Tax ID can be blank for Dubai or any other such Country instead to obtain functional equivalent for such cases.

You can download the FATCA / CRS form from the following web link.

http://barodapioneer.in/Downloads/Pages/application-form.aspx​