India: Tax Residency Certificates

Among them was a change which affects foreigners (both individuals and entities) seeking to claim tax benefits in India under a tax treaty. Those looking for relief from double taxation would need to obtain a Tax Residency Certificate (TRC) from his/her country to substantiate claims for relief.  

“an assessee (taxpayer), not being a resident, to whom an agreement referred to in sub-section (1) of s. 90 applies, shall not be entitled to claim any relief under a Double Taxation Avoidance Agreement unless a certificate, containing such particulars as may be prescribed, of his being a resident in any country outside India or specified territory outside India, as the case may be, is obtained by him from the Government of that country or specified territory.”

On September 17, the Central Board of Direct Taxes finally issued Rule 21AB, outlining the format that the TRC should take.   The requirements are as follows:

(1)     Certificate particulars

(i) Name of the taxpayer;

(ii) Status (individual, company, firm etc.) of the taxpayer;

(iii) Nationality (in case of individual);

(iv) Country or specified territory of incorporation or registration (in case of others);

(v) taxpayer’s tax identification number in the country or specified territory of residence or in case no such number, then, a unique number on the basis of which the person is identified by the Government of the country or the specified territory;

(vi) Residential status for the purposes of tax;

(vii) Period for which the certificate is applicable; and

(viii) Address of the applicant for the period for which the certificate is applicable;

(2) The certificate referred to in sub-rule (1) shall be duly verified by the Government of the country or the specified territory of which the taxpayer, referred to in sub-rule (1), claims to be a resident for the purposes of tax.

(3) A taxpayer, being a resident in India, shall, for obtaining a certificate of residence for the purposes of an agreement referred to in section 90 and section 90A, make an application in Form No. 10FA to the Assessing Officer.

(4) The Assessing Officer on receipt of an application referred to in sub-rule (3) and being satisfied in this behalf, shall issue a certificate of residence in respect of the taxpayer in Form No. 10FB.

While the rule is effective for tax years beginning April 1, 2013, the requirement to provide the certificate was effective beginning April 1, 2012.  Therefore, taxpayers claiming relief from a double tax treaty should comply with the new rule as of the effective date of the new law–April 1, 2012.