Frequently Asked Tax Questions by Qualified Foreign Investors (QFIs)

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From: editor@itatonline.org <itatonline.org@gmail.com>
Date: Wed, Dec 26, 2012 at 2:52 PM
Subject: Message from EGroup of SolapurCAs Frequently Asked Tax Questions by Qualified Foreign Investors (QFIs)
To: editor@itatonline.org

 

Dear Subscriber,

Frequently Asked Tax Questions by Qualified Foreign Investors (QFIs)

The CBDT has issued a Press release dated 26-12-2012 in which it has answered several questions relating to foreign investors in an easy-to-understand format. The questions raised pertain to the requirement to obtain PAN, how to compute capital gains, how to offer income to tax, the applicability of treaty benefits, the obligation to deduct TDS, set-off of losses, rate of tax etc. The FAQs are very important for all tax practitioners.

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Regards,

Editor,

itatonline.org

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FEMA/RBI updates

1. Export of Goods and Services - Receipt of advance payment for export of goods Involving shipment (manufacture and ship) beyond one year

2. Release of Foreign Exchange for Imports - Further Liberalisation

 

Export of Goods and Services - Receipt of advance payment for export of goods Involving shipment (manufacture and ship) beyond one year

RESERVE BANK OF INDIA

Foreign Exchange Department

Central Office

Mumbai - 400 001

RBI/2011-12/ 403                                           February 21, 2012
A.P. (DIR Series) Circular No.81

To
All Category – I Authorised Dealer Banks

Madam / Sir,

Export of Goods and Services -

Receipt of advance payment for export of goods

Involving shipment (manufacture and ship) beyond one year

1.Attention of Authorised Dealer Category – I (AD Category I) banks is invited to the sub-regulation (2) of Regulation 16 of the Foreign Exchange Management (Export of Goods and Services) Regulations, 2000, notified vide Notification No.FEMA.23/RB-2000, dated 3rd May 2000, as amended from time to time, in terms of which prior approval of the Reserve Bank is required to be obtained by an exporter for receipt of advance where the export agreement provides for shipment of goods extending beyond the period of one year from the date of receipt of advance payment.

2. With a view to liberalizing the procedure, it has been decided to permit AD Category- I banks to allow exporters to receive advance payment for export of goods which would take more than one year to manufacture and ship and where the 'export agreement' provides for shipment of goods extending beyond the period of one year from the date of receipt of advance payment subject to the following conditions:-

i) the KYC and due diligence exercise has been done by the AD Category –I bank for the overseas buyer;

ii) compliance with the Anti Money Laundering standards has been ensured;

iii) the AD Category-I bank should ensure that export advance received by the exporter should be utilized to execute export and not for any other purpose i.e., the transaction is a bona-fide transaction;

iv) progress payment, if any, should be received directly from the overseas buyer strictly in terms of the contract;

v) the rate of interest, if any, payable on the advance payment shall not exceed London Inter-Bank Offered Rate (LIBOR) + 100 basis points;

vi) there should be no instance of refund exceeding 10% of the advance payment received in the last three years;

vii) the documents covering the shipment should be routed through the same authorised dealer bank; and

viii) in the event of the exporter's inability to make the shipment, partly or fully, no remittance towards refund of unutilized portion of advance payment or towards payment of interest should be made without the prior approval of the Reserve Bank.

3. Necessary amendments to the Foreign Exchange Management (Export of Goods and Services) Regulations, 2000, wherever necessary, are being issued separately.

4. AD Category - I banks may bring the contents of this circular to the notice of their constituents and customers concerned.

5. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any law.

Yours faithfully,

(Rashmi Fauzdar)

Chief General Manager

Release of Foreign Exchange for Imports - Further Liberalisation

RESERVE BANK OF INDIA

Foreign Exchange Department

Central Office

Mumbai - 400 001

RBI/2011-12/404                                       February 21, 2012
A.P. (DIR Series) Circular No. 82

To
All Authorised Dealers in Foreign Exchange

Madam / Sir,

Release of Foreign Exchange for Imports – Further Liberalisation

1.Attention of all the Authorised Dealers (ADs) in foreign exchange is invited to the A.P.(DIR Series) Circular No. 106 dated June 19, 2003 in terms of which applications by persons, firms and companies for making payments, exceeding USD 500 or its equivalent towards imports into India must be made in Form A-1.

2. Based on suggestions received from the various stake holders, the said limit has been reviewed and it has been decided as a measure of liberalization to raise the above limit for foreign exchange remittance towards imports without any documentation formalities, from USD 500 or its equivalent to USD 5000 or its equivalent, with immediate effect.

3. It is clarified that the ADs need not obtain any document, including Form A-1, except a simple letter from the applicant containing the basic information viz., the name and the address of the applicant, name and address of the beneficiary, amount to be remitted and the purpose of remittance, as long as the exchange being purchased is for a current account transaction (and is not included in the Schedules I and II of the Foreign Exchange Management (Current Account Transactions) Rules, 2000 framed by Government of India vide Notification No. G.S.R.381 (E) dated May 3, 2000, as amended from time to time, the amount does not exceed USD 5000 or its equivalent and the payment is made by a cheque drawn on the applicant's bank account or by a Demand Draft.

4. Authorised Dealers may bring the contents of this circular to the notice of their constituents and customers concerned.

5. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully,

(Rashmi Fauzdar)

Chief General Manager

Purchase of Immovable Property in India - Reporting Requirement

Clarification - Purchase of Immovable Property in India – Reporting requirement

RBI/2011/12/399
A.P. (DIR Series) Circular No. 79

February 15, 2012

To

All
Authorised Dealers in Foreign Exchange

Madam /Sir,

Clarification - Purchase of Immovable Property in India –
Reporting requirement

1.Attention of Authorised Dealer Category-I banks is invited to Regulation 5 of Notification No. FEMA 21/2000-RB viz. Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India), Regulations, 2000 dated May 3, 2000, as amended from time to time. In terms of the above Regulation, when a person resident outside India, who has established in India in accordance with the Foreign Exchange Management (Establishment in India of Branch or Office or other Place of Business) Regulations, 2000, a branch, office or other place of business, excluding a liaison office, acquires any immovable property in India in accordance with the provision of said regulation, the said person has to file with the Reserve Bank a declaration in the form IPI annexed to those regulations, not later than ninety days from the date of such acquisition. As the form is required to be submitted by such persons only, the form is suitably amended to reflect the position.

2.  It is clarified that the extant regulations do not prescribe any reporting requirements for transactions where a person resident outside India who is a citizen of India or a Person of Indian Origin (PIO) as defined in Regulation 2(c) of Notification No. FEMA 21/2000-RB, ibid, acquire/s immovable property in India in accordance with the said provisions of the aforesaid Notification. Form IPI has been, accordingly, amended for greater clarity.

3. Authorised Dealer Category-I banks may bring the contents of this circular to the notice of their constituents and customers concerned.

4. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully,

(Meena Hemchandra)

Chief General Manager-in-Charge

Annex

[Annex to A.P. (DIR Series) Circular No. 79
dated February 15, 2012]

Form IPI

( See Regulation 5 )

Declaration of immovable property acquired in Indiaby a person resident outside India who has established in India a branch, office or other place of business, excluding a liaison office

Instructions:

1. The declaration should be completed in duplicate and submitted directly to the Chief General Manager, Foreign Exchange  Department, (Foreign Investment Division), Reserve Bank  of India , Central Office , Mumbai – 400001 within 90 days from the date of acquisition of the immovable property.
2. This form is not to be submitted by a person resident outside India who is a citizen of India or a Person of Indian Origin (PIO) acquiring immovable property in India under General Permission in accordance with Regulations 3 and 4 of Notification No. FEMA 21/2000-RB dated May 3, 2000.

Documentation:

Certified copies of letter of approval from Reserve Bank obtained under section 6(6) of FEMA, 1999 (42 of 1999).

1		Full name and address of the acquirer who has acquired the immovable property
2	(a)	Description of immovable property	(a)
	(b)	Details of its exact location stating the name of the state, town and municipal/survey number, etc	(b)
3	(a)	Purpose for which the immovable property has been acquired	(a)
	(b)	Number and date of Reserve Bank's permission , if any	(b)
4		Date of aquisition of the immovable property
5	(a)	How the immovable property was acquired i.e. whether by way of purchase or lease	(a)
	(b)	Name , citizenship and address of the seller/lessor	(b)
	(c)	Amount of purchase price and sources of funds	(c)

I/ We
hereby declare that-

(a) the particulars given above are true and correct to the best of my/our knowledge and belief;

(b) no portion of the said property has been leased /rented to, or is otherwise being allowed to be used by, any other party.

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(Signature of Authorised official)

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