FATCA stands for the Foreign Account Tax Compliance Act, a U.S. tax initiative that requires all financial Institutes (including Indian Mutual Funds) to report financial transactions of US persons including entities in which U.S. persons hold a substantial ownership, etc. to the relevant tax authorities. It is introduced by the United States Department of Treasury and the US Internal Revenue Service (IRS), the purpose of FATCA is to encourage better tax compliance by preventing US persons from using financial institutions outside US to avoid US taxation on their income and assets.
As part of FATCA and various ongoing tax and regulatory developments around the globe financial institutions are required to do an additional investor related due diligence. Towards compliance with FATCA, we would be required to seek additional personal, tax and beneficial owner information and certain certifications and documentation from our investors. Indian Mutual Funds are required to share financial account / asset information of accountholders who are tax residents of US.
FATCA legislation will affect both individual and entities customers who are treated as a ‘US person’ for US tax purposes. The FATCA legislation will also affect certain types of entities with beneficial owners/ controlling persons from US.
An account having U.S. indicia like U.S place of birth, U.S. address etc. does not necessarily mean that the account would be reported. However such accounts would be subjected to closer scrutiny.
The 'term US person' means:
a citizen or resident of the United States
a partnership created or organised in the United States or under the law of the United States or of any state, or the District of Columbia
a corporation created or organised in the United States or under the law of the United States or of any state, or the District of Columbia
any estate or trust other than a foreign estate or foreign trust
a person that meets the substantial presence test
any other person that is not a foreign person
an individual born in the United States
an individual who has a parent who is a US citizen
a former alien who has been naturalised as a US citizen
an individual born in Puerto Rico
an individual born in Guam
an individual born in the US Virgin Islands
Investors are expected to provide details such as Country of Tax residence, Tax Identification Number from such country, Country of Birth, Country of Citizenship, etc. at the time of Initial Investment or opening of folio.
Any change in the status or information or certification previously provided should also be intimated to Investocafe within 30 days.