Cyprus Granted FPI Category I Licence by The Government of India

 

Background

The Securities and Exchange Board of India (SEBI) has allowed entities to invest in India via various routes, such as Foreign Direct Investment (FDI), Foreign Portfolio Investment (FPI), Foreign Venture Capital Investment, Alternative Investment Fund etc. The Foreign Portfolio Investment (FPI) regime is currently the route chosen by many global investors that comply with the regulations.

Foreign Portfolio Investment

FPI involves holding financial assets in a country other than the investor’s country. Such holdings include stocks, bonds, shares, mutual funds, units of business trusts, AGRs, GDRs etc.The FPI regime came after the merging of Foreign Institutional Investor (FII) and Qualified Foreign Investor (QFI) as a harmonised route in India.

FPI Category I Explained:

Under the SEBI amendments of the Foreign Portfolio Investors Regulations 2019 the scope of granting Category I Licence was enhanced to contain entities outside the Financial Action

Task Force (FATF) members that have reached an agreement with the Government of India.

FPI applicants are considered to be:

● appropriately regulated funds;

● unregulated funds whose Investment Manager is appropriately regulated and registered as a Category I FPI; and

● university related endowment funds of universities in existence for more

than 5 years Cyprus: eligible for Category I Licence and the impact on the economy On June 14th, the Government of India issued a notification form the Department of economic affairs approving Cyprus as an eligible country for obtaining FPI Category I Licence subject to applicable requirements.

Key Takeaways:

● Investors in Category I FPIs are exempt from the applicability of “Indirect Transfer” provisions under the Indian Income-tax Act. Indirect Transfer tax provision is applicable to an overseas investor upon transfer of shares / interest in a foreign entity which derives its value from assets in India

● Issue/ invest in Offshore Derivative Instruments (such as Participatory Notes), after compliance with the Know Your Client (KYC) norms as specified by SEBI;

● Lesser KYC documentation required by SEBI as compared to Category II FPI;

● Higher position limits for investing in derivatives.

Our Services

Our team at Audinet shall

● assist you by offering advice and guided structuring under the FPI route as well as by enabling you to set up the structure under the route in question. ● guide you to apply for registration with SEBI which will include obtaining Permanent Account Number (PAN) from Indian tax authorities. ● collaborate with the custodian for obtaining information on periodic transactions and maintaining necessary records of the same. ● estimate tax liability in respect of income earned on securities considering provisions of the Indian Income Tax Act and the Treaty (i.e. Double Taxation Avoidance Agreement) along with the applicability of Multi-Lateral Instrument. ● provide certificate/tax letters for repatriation of funds out of India as per the requirements of the Indian Income-tax Act and the Reserve Bank of India (RBI) under foreign exchange guidelines. ● prepare and file Annual Income Tax Return. ● address and respond to notices/letters issued by the Indian tax authorities and advise accordingly. ● appear before the Indian tax authorities in the course of any proceedings and review assessment orders passed by them. ● oversee any correspondence with the Indian tax authorities.