Do we file FC-GPR or FC-TRS for our transaction?
It depends on whether shares were issued or transferred. FC-GPR reports a share issue by an Indian company to a foreign investor, where new shares come into existence and money reaches the company. FC-TRS reports a transfer of existing shares across residency lines, where the shares change hands between a resident and a non-resident and the company itself may receive nothing. The two are reported by different people for that reason. Getting the characterisation right is the first question on the file, because the reporting clock runs from the transaction and starting on the wrong form costs part of it.
Who reports a share transfer from an NRI to an Indian resident?
The parties to the transfer are the ones in scope: the filing exists for share transfers across residency lines, so a sale by a non-resident to a resident is reportable in the same way as the reverse. In practice the Indian company is involved whether or not it is the filer, because the transfer has to be recorded in its register and the paperwork sits with it. We settle who is filing before the transfer documents are signed rather than afterwards, because the reporting clock does not wait for the parties to agree between themselves who was responsible.
Does a share issue to our foreign parent company need reporting?
Yes. An issue of shares by an Indian company to a foreign investor is the core case for FC-GPR, and a parent subscribing for shares in its own subsidiary is a foreign investor for this purpose. Intra-group transactions are the ones most often missed, because they feel internal and the board paperwork can be produced in an afternoon. The reporting obligation is unaffected by the relationship between the parties. We work backwards from the date funds reached the company, because that is where the reporting clock starts rather than at the board resolution.
Why does our tax adviser need to see the FC-GPR valuation?
Because the same valuation drives both filings and the tax position underneath them. The exchange-control reporting and the capital-gains or issue-price analysis draw on one valuation of the shares, so a figure produced for the regulatory form alone will be the figure a tax authority examines later. Where two advisers each produce their own, the entity has two numbers for one transaction on its own record, and the difference becomes the thing that needs explaining. It is why we treat this as a tax adviser's deadline as well as a corporate-secretarial one and ask for the valuation before the reporting is prepared.
What happens if we report FC-GPR after the deadline?
Exchange-control reporting runs on short clocks from the transaction, and late reporting attracts compounding: the lateness is regularised through a separate process rather than simply corrected by filing now. That process needs the transaction papers to be coherent, which is where old delays cost the most, because the documents have to be assembled anyway and the original people may no longer be involved. Practically, the first step is to establish the real date the clock started and what is actually outstanding, then deal with the lateness on that basis instead of filing something and hoping the date is not noticed.
Both parties to our transfer are non-residents. Is it reportable?
Fix the residency of each party before answering, because that is what the filing turns on. The reporting is aimed at share issues to foreign investors and transfers between residents and non-residents, so a transaction with no residency crossing is a different question from the one this filing answers. Residency here is a conclusion from facts rather than from a passport or an address on a share register, and we have seen both parties described as non-resident when one of them was not. We take each party's status in writing first and decide the reporting from that.
Is double taxation illegal?
It is legal. Two countries can each have a valid claim on the same income — one because the income arose there, the other because you live there — and nothing prohibits both from exercising it. What exists instead is relief: tax treaties allocate the claim, and domestic law gives a credit for foreign tax paid. The relief is not automatic, though. It is claimed on a return, and unclaimed relief is simply lost. See how double taxation is relieved.
What is double tax relief and how is it given?
Three mechanisms, and which one you get depends on your residence country's law and the treaty. Exemption leaves the foreign income out of the residence-country base. Credit taxes it and then subtracts the foreign tax, capped at the residence-country tax on that income. Deduction merely reduces taxable income by the foreign tax, and is usually the weakest. Canada and the United States lead with credit; several treaties give exemption for specific income types. See claiming the credit.
