Financial institutions asked to register for FATCA by tomorrow

All Indian financial institutions with exposure to the US will have to register by tomorrow with the American tax authorities to avoid a hefty penalty tax of up to 30 per cent under the new Foreign Accounts Tax Compliance Act (FATCA).
While it has extended the deadline for signing of Inter Governmental Agreements (IGAs) with India and some other countries, the US Internal Revenue Service (IRS) has made it clear that all Foreign Financial Institutions (FFIs) need to register for FATCA and get a Global Intermediary Identification Number (GIIN) before January 1, 2015.
India agreed "in substance" earlier this year for the proposed IGA with the US in this regard, while it was to sign the pact by December 31, 2014 as per the previous deadline.

As per the initial agreement, financial sector regulators including Sebi had asked all intermediaries in June to register themselves for the FATCA compliance by December 31 and get their GIINs.
As the deadline ends tomorrow, financial sector regulators Sebi and RBI said in separate circulars that they were informed today by the government about the deadline and also about the latest clarifications issued by the IRS.
"The Government of India has informed Sebi vide communication dated December 30, 2014 that as per the FAQ published on the US IRS website, FFIs in Model 1 jurisdictions need to register with the US IRS and obtain a GIIN before January 1, 2015, or at the earliest, in order to avoid withholding.

"The FFIs who have registered but have not obtained a GIIN should indicate to the withholding agents that the GIIN is applied for," Sebi said, while releasing relevant details from the FAQ published by IRS on December 22.

"All Sebi-registered intermediaries who maintain US reportable accounts, as defined in the Model 1 IGA, may take action appropriately," the regulator said.
As per the 'Model 1' IGA proposed between India and the US, a financial institution will be required to submit the necessary information to the regulators and tax authorities in India, which in turn would pass on the details to the IRS. For other IGAs, the institutions would report directly to the IRS, failing which they will face the withholding tax.

Close to 1,000 Indian financial institutions and their overseas units were believed to have already registered with IRS and got their GIINs.