Global Tax Alert | 7 August 2013

India's CBDT prescribes information required to claim tax treaty benefit

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On 1 August 2013, India’s Central Board of Direct Taxes (CBDT) issued Notification No. 57 of 2013 (Notification) which is deemed to have come into force as of 1 April 2013. The Notification prescribes information that is required – in addition to a Tax Residency Certificate (TRC) – to claim tax treaty benefits. It follows the recent introduction of a provision in the Indian Tax Laws (ITL) which required a nonresident taxpayer to provide any documentation and information that may be prescribed in addition to obtaining a Tax Residency Certificate (TRC). A TRC is required to claim relief under the respective Double Taxation Avoidance Agreements (Treaty) that India has with other countries.

This Alert covers the key provisions of the Notification.

Background

Finance Act, 2012 introduced a provision in the ITL providing that a taxpayer will not be entitled to a Treaty benefit unless the TRC in the prescribed form has been obtained. A Rule was introduced1 prescribing the information to be contained in the TRC. This caused many challenges for a taxpayer since it was often not possible to obtain all the prescribed information in the TRC from the Government of the overseas country of which the taxpayer was a resident.

Finance Act, 2013 (FA 2013) amended these provisions. Accordingly, to claim benefits under a Treaty, a nonresident is required to provide a TRC.2 However, additionally, the taxpayer is required to provide such other documents and information, as may be prescribed. In furtherance of this provision, the Notification prescribes the information to be provided. The Notification is applicable from 1 April 2013.3

Notification requirements

The Notification contains the following details to be provided by a taxpayer in a prescribed format.4

  • Status (individual/company/firm) of the taxpayer.
  • Nationality (in the case of an individual) or country or specified territory of incorporation or registration (in the case of others).
  • The taxpayer’s tax identification number in the country or specified territory of residence and, if there is no such number, then, a unique number on the basis of which the taxpayer is identified by the Government of the country or the specified territory of which it claims to be a resident.
  • Period for which the residential status, as mentioned in the TRC, is applicable.
  • Address of the taxpayer in the country or territory outside India during the period for which the TRC, mentioned in iv) above, is applicable.

Furthermore, a taxpayer may not be required to provide the above information, or any part thereof, if it is already contained in the TRC.

The taxpayer is also required to keep and maintain such documents as are necessary to substantiate the information provided. The Tax Authority may require the taxpayer to provide these in relation to the claim of Treaty relief availed.

The prescribed format in the Notification additionally requires the Permanent Account Number (PAN) of the taxpayer to be provided, if allotted. PAN is a unique tax identification number allotted by the Indian Tax Authority. This format also requires a declaration that the TRC has been obtained from the Government of the relevant country or specified territory.

Verification is also required by the person providing the details to the effect that, to the best of his knowledge and belief, what is stated is correct, complete and is truly stated. Unlike certain other provisions of the ITL, like in the case of a tax return, the Notification does not prescribe who needs to sign and verify the declaration. To illustrate, while the income tax return generally needs to be signed by the managing director, the verification of details, as aforesaid, may be by any authorized person. The Notification requires the designation of the person verifying the form to be mentioned.

Implications

The information sought under the Notification, to a large extent, is comparable with the information required to be included in the TRC under the original provision prior to the FA 2013 amendment. Based on the FA 2013 amendment, the prescribed information to be a part of the TRC was omitted and a taxpayer was required to provide such other documents and information, as may be prescribed. The Notification requires self-provision of details as part of self-declaration only to the extent that the same are not part of the TRC procured. The Notification additionally requires the taxpayer to keep and maintain such documents as are necessary to substantiate the information provided. Taxpayers seeking to claim relief under a Treaty would need to comply with the requirements of the Notification. The requirement of procuring the TRC and providing the prescribed documents and information apply from tax year 2012-13 while the Notification has been made effective from 1 April 2013 (i.e., the first day of assessment year 2013-14 relevant to tax year 2012-13). Issues could arise as to the date from which the compliance would be warranted in terms of the Notification, although, in the context of the provisions, compliance, effective from tax year 2012-13, appears to be in line with the legislative intent.

Endnotes

1. Notification No. 39 of 2012 (See EY Tax Alert, CBDT notifies format of application and procedure for obtaining a TRC, dated 26 September 2012).

2. The condition of prescribed particulars to be part of the TRC was omitted.

3. Consequently, it is to apply for tax years beginning 1 April 2012. In India, the tax year is from 1 April to 31 March.

4. In Form No. 10F that has been prescribed for the purpose.

For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (India), Mumbai
  • Sudhir Kapadia
    +91 22 6192 0900
    sudhir.kapadia@in.ey.com
  • Hitesh Sharma
    +91 22 6192 0620
    hitesh.sharma@in.ey.com
Ernst & Young LLP (United Kingdom), Indian Tax Desk, London
  • Nachiket Deo
    +44 20 778 30862
    ndeo@uk.ey.com
Ernst & Young Solutions LLP, Indian Tax Desk, Singapore
  • Gagan Malik
    +65 6309 8524
    gagan.malik@sg.ey.com
Ernst & Young LLP, Indian Tax Desk, New York
  • Tejas Mody
    +1 212 773 4496
    tejas.mody@ey.com

EYG no. CM3710