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Atul Gupta QFI 17-08
Atul Gupta QFI 17-08
Friday, August 17, 2012 Organized by Capital Market Committee Indian Merchants Chamber Mumbai
Regulatory Interfaces Eligibility KYC Permitted Assets Classes Operational Procedures Taxation Repatriation Recommendations to make it a success
Regulatory Interfaces
SEBI
RBI
CBDT
FII
Prior approvals
About 3 months
QFI
No Approvals
About 2 weeks
Eligibility
FII AMCs / Pension Funds / Endowments / Banks / Trusts / Etc Broad Based Funds Individuals Foreign Corporates Foreign CorporatesListed, $ 2B asset base & avg. net profits of $ 50M. Eligibility Criteria Individuals must be foreign passport holders of 5 years with $ 50M net worth. Funds need to be regulated in their home jurisdiction. Declaration of being Fit and Proper!!! RBI Approvals FEMA Approval Not Required No questions asked. QFI Presently limited to any foreign entities from 45 countries. Disclosure of ultimate beneficiaries.
Eligible Investors
RBI and SEBI need to jointly take ownership for KRA to make it more investor friendly without impairing transparency Today, uplinking client data on KRA takes nearly a month too long, should not be more than 48 hours Overseas Attestation remains a nuisance Notary attestation costly & cumbersome, Indian Consulate very cumbersome too. Attestation by Banks limited ONLY to banks with presence in India! Since only FATF regime investors permitted, ought to allow regulated market intermediaries to attest for their Clients atleast.
FIIs 5% per Sub Account and 10% per FII in Investee Company Permitted both Debt & Growth Permitted Permitted Permitted
QFIs 5% per QFI subject to a maximum of 10% in aggregate per Investee Company Permitted both Debt & Growth Not Permitted Permitted No derivatives as yet. Only forex hedging permitted.
Mutual Funds
Taxation
Taxation of QFIs is an area where clarity is still lacking
Lack of clarity / uncertainties on following critical fronts: I. Is it obligatory on the part of QFI to file annual returns in India? II. QDP is required to deduct Withholding Taxes when securities are sold by QFI. What are those rates for withholding taxes? III. Treatment of losses incurred on some securities? IV. Is the QDP entitled to off set losses from profit trades? V. Are withholding taxes to be deducted on a daily basis from each trade and paid in to the government? VI. Does the QDP administer tax rates as per country specific DTAA agreement? VII. Does the CBDT issue a No Objection before funds may repatriated back to QFI?
Repatriation
No prior permission from any Regulator CBDT or SEBI or RBI QDP to take responsibility by deducting Withholding taxes as per Statute
QDP carries responsibility for future tax demands post closure of account or due to inadequate funds available in India
QDP makes remittance after satisfying for tax payments of QFI
QDP may retain some balances in the QFI account to offset future tax demands for a couple of years
Operational Summary
Account Set Up QFI ONLY from FATF countries (presently 45) Disclosure of Ultimate Beneficiaries PAN Card QDP Custodian Multiple Brokers India Advisor (Optional) Single Bank account Single Demat account Limited POA with QDP Operations Pre-funding of trades Clearing & Settlement by QDP Custodians directly with Exchanges Permitted 1. Equity 2. Mutual Funds 3. Corporate debt Exclusions 1. Derivatives 2. G Secs Tax administered by QDP Grey Areas Tax administration to be further clarified by CBDT Obligation on QFI for filing of returns? Computation of withholding taxes per trade Vs periodic aggregation of profits / losses? DTAA benefits?