U.S. issues rule requiring banks to identify shell company owners

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A company list showing the Mossack Fonseca law firm is pictured on a sign at the Arango Orillac Building in Panama City in this April 3, 2016 file photo. REUTERS/Carlos Jasso/Files

The Obama administration is issuing a long-delayed rule requiring the financial industry to identify the real owners of companies and proposing a bill that would require companies to report the identities of their owners to the federal government, U.S. officials said on Thursday.

The Customer Due Diligence (CDD) rule, in the works since 2012, and the proposed legislation are meant to hinder criminals from using shell companies to hide ownership and launder money, finance terror, and commit other threats to the global financial system.

The use of shell companies to hide assets and avoid taxes is in the spotlight following a massive leak of data from the Panama-based law firm Mossack Fonseca, which embarrassed several world leaders and sparked government investigations around the globe into possible financial wrongdoing by the wealthy elite. The International Consortium of Investigative Journalists said it will release a searchable database of more than 200,000 offshore entities next week.

“Fundamentally our financial system should not provide the rich, the powerful, and the corrupt with the opportunity to shield their assets,” said Wally Adeyemo, the U.S. deputy national security advisor for international economics, in a call with reporters on Thursday. “Nobody should be able to hide in the shadows from their legal obligations.”

The final CDD rule will require banks, brokers, mutual funds and other financial institutions to collect and verify the identities of the real people, or “beneficial owners,” who own and control companies when those companies open accounts.

Financial institutions will have to verify the identity of any person or company who owns more than 25 percent of the company, and one live person who controls the company even if that person owns less than 25 percent.

Banks will have two years to get their systems into compliance, said Jennifer Fowler, the U.S. Treasury deputy assistant secretary for terrorist financing.

The U.S. Treasury said in 2012 it planned to propose a rule that would clarify and standardize financial institutions’ obligations to know the identities of their customers.

But the proposal generated opposition from the financial industry, which argued it would be costly, ineffective, and difficult to implement because the United States lacks a national database of corporate information.

To address one of those industry concerns, Treasury will propose legislation requiring companies to report to the Treasury the identity of beneficial owners when a company is incorporated. The legislation would create a central registry of beneficial ownership, something the U.S. currently does not have, Fowler said.

U.S. secretaries of state have lobbied against similar legislative action in the past, arguing that the Internal Revenue Service already has corporate ownership records that it could make available to law enforcement.

Adeyemo said the Obama administration had been “consulting actively” with secretaries of state. “This is a place where we need Congress to act,” he said.

Taken together, the measures would make the financial system more transparent and close loopholes that allow for abuse or illegal activity, officials said.

More than 1,000 prosecutions are brought each year in the United States for money laundering, Fowler said. “This is a record that no one in the world can match.”

But, she added, “there are vulnerabilities that we need to address in order to maintain an effective regime.”

The Treasury is also proposing a regulation that would increase requirements for some foreign-owned companies operating in the United States to report information to the government, which officials said would prevent the use of those companies for tax avoidance purposes.

In addition, the Justice Department is proposing amendments that would strengthen its ability to pursue foreign corruption cases, including issuing subpoenas for records in money laundering investigations, obtaining overseas records, and using classified information in civil cases.

Source: http://www.reuters.com/article/us-usa-regulations-finance-idUSKCN0XX02O

Income tax refunds worth Rs 1.22 lakh cr issued in FY’16: Govt

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The Income Tax department has issued 2.10 crore refunds totalling over Rs 1.22 lakh crore in 2015-16, which saw 94 per cent the returns being filed online.

“During FY 2015-16, more than 2.10 crore refunds amounting to Rs 1,22,425 crore were paid compared to Rs 1,12,188 crore in the Financial Year 2014-15 and Rs 89,664 crore in the Financial Year 2013-14,” a finance ministry statement said.

In 2015-16, more than 94 per cent of income tax returns were filed online and 4.14 crore returns were processed by the Central Processing Centre (CPC), Bengaluru, without any human intervention.

Both the Central Board of Director Taxes (CBDT) and Central Board of Excise and Customs (CBEC) are making optimum use of technology for expeditious disposal of assessment and refunds as well as for addressing the issues relating to custom clearance and facilitating trade among others, it said.

As regards indirect tax collections last fiscal, the indirect tax to GDP ratio is about 5.17 per cent as compared to 4.36 per cent for FY 2014-15.

Indirect tax to GDP ratio for the current Financial Year 2016-17 is estimated to be 5.20 per cent, the ministry said.

E-payment of Central Excise and Service Tax refunds and rebates through RTEGS/NEFT has been implemented and 80 percent of the refund amount is granted within 5 days for service exporters.

Single Window Interface for Facilitating Trade (SWIFT) acts as a single point interface for over 50 offices of six government agencies for clearance of Exim Goods and reduces documentation and costs, thereby benefiting over 97 per cent of India’s imports, the ministry added.

Source: http://www.firstpost.com/business/income-tax-refund-financial-year-2768332.html

Ultra-rich must declare cost price of expensive assets: CBDT

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People with annual income of over Rs 50 lakh will have to disclose the acquisition cost of all the assets like land, building and jewellery in the Income Tax return forms for assessment year 2016-17.

The luxury items to be disclosed will also include utensils, apparels and furnitures studded with precious stones and ornaments made of gold, silver, platinum or any other precious metal or alloy.

“The amount in respect of assets to be reported will be the cost price of such assets to the assessee,” the Central Board of Direct Taxes ( CBDT) has said while issuing instructions on the new ITR forms.

In case the precious items had been received as gifts, the assessee will have to declare the cost of acquisition by the previous owner along with value additions.
“In case where the cost at which the asset was acquired by the previous owner is not ascertainable and no wealth-tax return was filed in respect of such asset, the value may be estimated at the circle rate or bullion rate, as the case may be, on the date of acquisition by the assessee as increased by cost of improvement, if any, or March 31, 2016,” the instructions said.

The assessee will also have to declare whether such items and their value were disclosed at the time of filing wealth tax returns earlier.

The tax department had in April notified the new ITR forms for assessment year 2016-17 and introduced a fresh reporting column in ITR-1, ITR-2 and 2A called ‘Asset and Liability at the end of the year’ which is applicable in cases where the total income exceeds Rs 50 lakh.

“There are only 1.5 lakh individuals whose total income would be above Rs 50 lakh. This schedule in ITR only applies to ultra-rich and will not affect the common man,” Revenue Secretary Hasmukh Adhia had earlier said.

As per the new schedule in ITR forms, individuals and entities coming under this total income bracket will have to mention the total cost of movable and immovable assets.

While immovable assets include land and building, movable assets to be disclosed were cash in hand, jewellery, bullion, vehicles, yachts, boats, aircraft etc.

ITR-1 can be filed by individuals having income from salaries, one house property and from other sources including interest. ITR-2 is filed by Individuals and HUFs not having income from business or profession. ITR-2A is filed by those individuals and HUFs who do not have income from business or profession and capital gains and who do not hold foreign assets.

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Financial inequality highest in India, China: International Monetary Fund

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According to IMF, China and India have grown rapidly and reduced poverty sharply, however, this impressive economic performance has been accompanied by increasing levels of inequality.

Financial inequality is highest in India and China among Asia Pacific countries despite the two being among the fastest growing economies, IMF has said.

According to the International Monetary Fund, China and India have grown rapidly and reduced poverty sharply, however, this impressive economic performance has been accompanied by increasing levels of inequality.

“In the past, rapid growth in Asia came with equitable distribution of the gains. But more recently, while the fast-growing Asian economies have lifted millions out of poverty they have been unable to replicate the ‘growth with equity’ miracle,” the Fund said.

As per the report, China managed to increase middle class in urban areas, as did Thailand, while India and Indonesia struggled to lift sizeable portions of their populations toward higher income levels.

“In India, differences between rural and urban areas have increased, and have been accompanied by rising intra-urban inequality,” it said.

Many factors have been identified as key drivers of the inequality between rural and urban areas in China and India.

In China, rapid industrialisation in particular regions and the concentration of foreign direct investment in coastal areas have led to substantial inequalities between coastal and interior regions. Other factors also include low educational attainment and low returns to education in rural areas.

On India, the report said inter provincial inequality is lower in India than in China, and rising inequality in India has been found to be primarily an urban phenomenon.

Moreover, the rural-urban income gap has increased, and higher rural inflation has been found to be a key driver of this. Educational attainment has also been identified as an important factor explaining rising inequality in India over the past two decades, the Fund said.

The two countries have introduced a number of policies to tackle the rising inequality.

China introduced the Minimum Livelihood Guarantee Scheme (Dibao) for social protection in the 1990s. Moreover, various social programs are aiming to expand social safety nets and provide support for the development of rural areas and western regions.

In India, the government introduced the Mahatma Gandhi National Rural Employment Guarantee Act to support rural livelihoods by providing at least 100 days of employment. Programs to improve education include the National Education Scheme and Midday Meal Scheme.

The Fund lauded the JAM (Jan Dhan-Aadhaar-Mobile) initiative and said that “the JAM trinity initiative helped India in making substantial advances in financial inclusion. More recently, programs aiming for universal bank account coverage were launched”.

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Startup funding: Money will not dry up, will look for quality

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According to Indian Angel Network president Padmaja Ruparel, there has been an increase of 20% in the number of deals but the overall amount has gone up by 12%

While there are concerns about money drying up for start-ups in the country this year, venture capitalists say there is more money coming into the country but it will find its way only into quality ventures.

As a result, venture capitalists are going into a lot more details than before. So no more raising of funds and picking up cheques in coffee shops. And this is not bad, they reckon, as many people were starting up ventures just because capital was easily available.

Indian Angel Network president Padmaja Ruparel said that he has seen an increase of  20% in the number of deals but the overall amount has gone up by 12%.

“There is a huge interest among the investor groups in a variety of sectors. But there is much more diligence on how much money is required,” said Ruparel. There will be much deeper, sharper diligence and unit economics would be in focus, she said at a panel discussion on Raising and Deploying Funds in a Changed World at TieCon Pune, 2016.

Amid this talk of gloom and doom, people have raised huge funds but then they will be deployed carefully, said Sanjay Nath, co-founder Blume Ventures. “There is no rush to deploy funds and more time will be taken on deals,” he said adding, “good companies and quality founders are raising larger rounds of money.”

SAIF Partners MD & Advisor Alok Goel said around $2.5 billion would be deployed in two to three years and all this talk of money not being there was not true. “The most risk averse guys were becoming entrepreneurs just because capital was available and this was a risk. The craziness of the last 15 months of funding was worrying,” Goel said.

Remaining bullish about 2016, he said the consumer pain points were still there and those who could cut through the clutter would get funding.

Goel said the VC industry had seen three distinct phases in the country – prior to 2013 it was all about replicating successfully models of the West here; between 2013 an 2015 ideas were being copied here before even being tested and tried in the US, which doubled the risk in the business and was not going to work. The new phase is about looking at India specific problems and solving them instead, he said.

Qualcom Ventures VP Karthee Madasamy said such ups and downs were part of the cycle and they remain unfazed. “We have done six plus follow-on and new deals last year. We will do the same this year and have no plans to change that,” said Madasamy.

He expects India to do well in the area of hardware in the next few years with lot of start-ups coming up in India in this sector.

Source: http://www.financialexpress.com/article/industry/companies/deeper-due-diligence-precedes-start-up-funding/239822/

If you bought property but have not deposited TDS, you may get a tax notice

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While the rule has been in effect since June 1, 2013, many buyers are unaware or often confused about how to calculate the tax.If you bought property worth more than Rs 50 lakh and did not deduct tax at source (TDS) or failed to deposit the amount with the income tax department on time, you may have to pay a penalty of up to Rs 1 lakh.

Several taxpayers recently received notices from the department for no t doing so. Anyone buying real estate worth more than Rs 50 lakh has to deduct 1% of the price of the property before paying the seller. That 1% TDS has to be deposited with the tax department using Form 26 QB.

“The income tax department recently matched the TDS data with the data they received from the property registrar for property transactions over `50 lakh. Wherever there was a discrepancy, either the buyers failed to deduct or deposit the TDS, a notice has been sent,” said Vaibhav Sankla, director, H&R Block.

While the rule has been in effect since June 1, 2013, many buyers are unaware or often confused about how to calculate the tax. TDS has to be calculated on the total sale price  and not the amount exceeding Rs 50 lakh.

“Sometimes total sale price, which exceeds `50 lakh in aggregate, may be payable in instalments. The TDS in that case must be deducted from each instalment no matter how small the instalment is. Most people fail to do that,” said Archit Gupta, founder, ClearTax.in.

In case the payment is made in instalments, then TDS needs to be deducted at the time of making each payment. This TDS, deducted each time while paying the instalment, is to be deposited with the department by way of return cum challan (Form 26QB) within seven days of the following month of making the payment. Failing to do so can, apart from the dues and late filing interest, attract a penalty under Section 271H of up to Rs 1 lakh.

For those who have received a notice, the immediate corrective step to avoid paying a penalty is to pay the TDS along with the applicable interest and late filing fee.

The interest payable under Section 201 is 1% per month if tax wasn’t deducted and 1.5% in case this was done but not paid.

“This interest is calculated on the TDS amount from the date of payment, whether paid in lump sum or in instalments,” said Sankla. Take the example of a property purchased in January 2015 worth Rs 60 lakh where the first Rs 20 lakh was paid that month and the rest in June that year. For the first instalment of Rs 20 lakh, the interest will be applicable from January onwards, while that on the second payment will be from June 2015. There is also a late filing fee under Section 234E for delaying the interest payment of `200 per day, subject to the maximum of taxes due. There may be some leniency if the seller has already paid capital gains tax or claimed capital gains exemption (on the sale of property).

“The intent of the department is that there is no tax evasion. So, if the seller has already paid the taxes, the buyer can submit Form 26A certificate from a chartered accountant and request that penalty under Section 234E should not be levied,” said Gupta. Though this will save you from the late filing fee, the interest under Section 201 will still apply.

Buyers should also remember to issue Form 16B. “It is generated via TRACES and the seller may not be able to take tax credit for TDS deducted in case of non-filing or latefiling of Form 26QB,” said Gupta. Penalties remain the same for failing to do so.

Source:http://economictimes.indiatimes.com/articleshow/51901867.cms

 

Government looks to resolve 100 transfer pricing issues; seeks to sign more advanced agreements

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Due to new regulatory frameworks like Base Erosion and Profit Shifting (BEPS), transfer pricing disputes could go up in all major economies

In a significant move towards a more progressive taxation policy the revenue officials have set an aggressive target of resolving about 100 transfer pricing issues by signing advance pricing agreements (APAs) with multinationals this fiscal, people close to the development said.

The government, through the Central Bureau of Direct Taxes (CBDT), had signed a record 55 APAs with multinationals in 2015-16. In all, the Indian government has signed 64 APAs, including 62 in the last two years. Now the government is getting more ambitious and officials are confident about achieving the target.

“We are already working on about 175 cases (APAs), and the target is achievable,” said a person close to the development. “Also, the officers who are dealing with the issue have now got fair amount of experience and work would be faster going ahead.”

Samir Gandhi, partner at Deloitte Haskins & Sells LLP, said, “In last one year, we have seen that the government has been very active in resolving the transfer pricing cases through the APAs. Going forward it is very likely that we will see more number of cases being resolved.”

An APA is mainly an agreement between a tax payer—mostly multinationals— and tax authority— CBDT in India’s case—where the transfer pricing methodology is determined. The methodology to calculate taxes could then be used for an agreed period of time on the tax payer’s future international transactions.

Transfer pricing disputes are mainly related to the calculation of profit made by multinational companies and how they have been shifted to their parent. Many firms have gone to court, challenging the government’s transfer pricing calculations. In July 2012, the government introduced the APA programme, which allows companies and the revenue authorities to negotiate the rate at which tax is to be paid and avoid disputes. Of the total APAs signed last year, 53 were unilateral agreements while two were bilateral agreements.

A unilateral APA is an agreement between the tax payer and the tax authority of the country (CBDT). A bilateral agreement is signed by these two plus the tax authority of the country where the multinational is headquartered.

Industry trackers expect that some more “complicated” APAs would be signed this year. “Going ahead some of these cases (APAs) will involve relatively complex cases/transactions and also application of TP methodologies of profit split and TNMM (transactional net margin method),” said Gandhi of Deloitte. Industry experts said the shift from a time when India was considered to be one of the most aggressive in the world on transfer pricing to the current situation has happened in last two years.

“There are primarily two developments which have happened in last one year in the context of transfer pricing disputes,” said Rohan K Phatarphekar, partner and national head, global transfer pricing services, at KPMG. “One is the government’s agenda of having a non-adversarial tax regime and improving the ease of doing business, which has resulted in lesser amount of transfer pricing adjustments, and the other is the CBDT circular clearly laying out the guidelines as to when a case needs to be referred for transfer pricing assessment which has reduced the overall number of cases picked up for scrutiny,” he said.

Experts also pointed out that the government’s stance on liberal transfer pricing comes at a time when many multinationals face the prospect of increasing disputes across the world. Due to new regulatory frameworks like Base Erosion and Profit Shifting (BEPS), transfer pricing disputes could go up in all major economies.

Companies and tax consultants said that not only is the Indian government going all guns to resolve old issues in last one year, but also there has been no major transfer pricing demand as officials did not take an aggressive stance. Currently there are about 650 pending cases in APA, according to a report by Deloitte.

Going ahead, a lot of disputes also set to be resolved due to mutual APAs signed between Indian authorities and their US counterpart. This is mainly because the US Internal Revenue Service (IRS) has started accepting bilateral APA applications with India from February 16, 2016, the Deloitte report said.

Source:
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