The Central Board of Direct Taxes today issued a release announcing that financial institutions are not required to close bank accounts by 31 August 2016 if account holders’ self-certifications have not been obtained under an alternative procedure with respect to the FATCA regime.
The revised timelines for completing the required due diligence with respect to these accounts will be announced in the future. In the interim, financial institutions are directed to continue to work on completing the required due diligence, including obtaining self-certifications from account holders.
The intergovernmental agreement (IGA) between India and the United States for implementing the FATCA regime entered into force on 31 August 2015. Under an alternative procedure provided in Rule 114H(8) of the Income-tax Rules, 1962, financial institutions need to obtain a self-certification and to conduct due diligence procedures so as to determine the reasonableness of the self-certification in respect of all individual and entity accounts opened from 1 July 2014 to 31 August 2015.
The rules require such self-certifications and documentation must be obtained by the financial institutions by 31 August 2016; otherwise, the financial institutions are required to close the customers’ accounts and report these to the tax authorities if found to be “reportable accounts” as per the due diligence procedure for pre-existing accounts.
Today’s CBDT release [PDF 13 KB] explains that the tax authorities are aware that certain stakeholders have encountered difficulties in following the provisions for the “closure” of financial accounts.
Accordingly, the governments of India and the United States have been discussing the alternative procedures and considering adjusting these procedures to permit a few months of extension of the time for completing the due diligence process and in order not to require account closure within one year of entry into force of the agreement (i.e., August 31, 2016).
Read an August 2016 report [PDF 65 KB] prepared by the KPMG member firm in India
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.