MF investors: Less than a 4th comply with US tax law
Foreign Account Tax Compliance Act is a US global tax law. Countries must agree to the law or face the stick
Less than 25 per cent of mutual fund (MF) investors have given out details in line with Foreign Account Tax Compliance Act, or Fatca, a US tax law, said a source. Countries must agree to the law or face the stick. Non-compliant institutions could be frozen out of US markets.
“From next year, purchasing new units and switching between schemes will require investors to be Fatca-compliant,” said an MF official, on the condition of anonymity.
The registrar and transfer agents (RTAs) and fund houses have been sending mails to investors requesting updates.
Investors have to update their details by December 31, failing which they will not be able to open a new account. However, existing investments through systematic investment plans will be allowed to continue.
Any financial institution failing to comply with the Fatca norms will have to pay a 30 per cent penalty on all its US revenues, including dividend, interest, fees, and sales.
“About 40 per cent of investors registered with MF Utilities have completed their Fatca formalities,” according to V Ramesh, managing director and chief executive at MF Utilities, a shared infrastructure of asset management companies to reduce duplication and increase efficiency. MF Utilities has 22,000 CANs (common account numbers) opened with them.
It must be noted that MF investors with multiple accounts among different fund houses no longer have to go to these to give the details on their compliance with Fatca. They can simply approach the four RTAs or MF Utilities.
The four major RTAs are CAMS, Karvy, Franklin Templeton, and Sundaram BNP Paribas Fund Services. CAMS and Karvy have nearly 90 per cent of all accounts registered with them. Fatca details need to be collected from those who have opened accounts on or after July 1, 2014, and those with an account whose value was above $50,000 (Rs 33 lakh) as on June 30, 2014. Fatca was introduced in 2010, to curb offshore tax evasion by US entities and citizens. The guidelines require foreign financial institutions receiving money from US investors to report the offshore holdings of those investors to American tax authorities.
These institutions have to make various declarations, such as names and addresses of the investors and details of their balances, receipts and withdrawals.
Fund houses have to conduct the Know Your Customer compliance requirement for this purpose.
