TRC to be accepted as residency proof: FM to foreign investors
Easing norms for investments through countries like Mauritius and Cyprus, Finance Minister P Chidambaram Tuesday said the tax residency certificate (TRC) issued by a foreign government will be accepted as proof of residency for availing benefits under tax treaties.
New Delhi: Easing norms for investments through countries like Mauritius and Cyprus, Finance Minister P Chidambaram Tuesday said the tax residency certificate (TRC) issued by a foreign government will be accepted as proof of residency for availing benefits under tax treaties.
"It is quite clear that Tax Residency Certificates will be accepted. But additional information can also be asked by the government but the TRC issued by a foreign government will be accepted as a certificate of residence," he told reporters after the passage of the Finance Bill in the Lok Sabha.
The move follows concerns that the provision in Finance Bill 2012 regarding the TRC would make it difficult for investors routing their funds from low-tax countries like Mauritius, Cyprus and Singapore to avail tax benefits of Double Taxation Avoidance Agreement (DTAA).
The Finance Bill 2013 had originally proposed to "amend Sections 90 and 90A in order to provide that submission of a tax residency certificate is a necessary but not a sufficient condition for claiming benefits under the agreements referred to in sections 90 and 90A".
As per this, a person holding TRC will also have to be the beneficial owner to claim benefits under DTAA "as TRC is necessary, but not sufficient condition for availing benefits".
"One of the significant changes (in the Bill passed today) include withdrawal of the proposed amendment relating to TRC," said Divya Baweja, Senior Director, Deloitte in India.
A new sub-section, Baweja said, has been introduced to provide that the non-resident assessee shall be required to furnish such other info or document as may be prescribed in the TRC.
The government has already clarified that with respect to investments from Mauritius, the circular 789 "continues to be in force, pending ongoing discussions between India and Mauritius".
The Finance Bill, passed by Lok Sabha amid Opposition walkout, further said that the government will reduce the tax on interest payments to foreigners on government and corporate debt to 5 percent from up to 20 percent for two years.
Chidambaram also said PAN requirement and higher withholding tax of 20 percent will not apply to interest paid to non-residents in respect of investments in long-term infrastructure bonds.
"These amendments will attract more investments in long-term infrastructure which is a very important need of the country," he hoped.