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Qualified Foreign Investor (‘QFI’)

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Presentation on theme: "Qualified Foreign Investor (‘QFI’)"— Presentation transcript:

1 Qualified Foreign Investor (‘QFI’)
December 2012

2 Contents Background Investment Conditions Mechanics & Process Flow
Taxation & Repatriation

3 Background

4 Introduction… Up to August 2011 August 2011 January 2012 July 2012
Foreign investment in Indian listed securities were permitted only under FII / Sub-account route Only NRIs were allowed till then Up to August 2011 A new category of foreign investor introduced “Qualified Foreign Investors” (QFI) Permitted to invest in Indian Mutual Funds August 2011 QFIs are permitted to invest directly in Indian Listed Equity Companies January 2012 QFI are permitted to invest directly in Indian corporate debt securities July 2012 An Opportunity for the Foreign Investors to invest directly in Indian listed companies

5 Who is a QFI ? Should Not Be Should Be
a person resident in a country that is compliant with FATF standards; Signatory to IOSCO’s multilateral MoU Should Not Be a person resident in India registered with SEBI as FII or Sub-account *Financial Action Task Force International Organisation of Securities Commission Memorandum of Understanding QFIs to meet KYC norms prescribed by SEBI No Need to obtain separate SEBI Registration !!

6 Investment Conditions

7 Permissible Transactions
QFIs can Purchase/Sale equity shares; Listed or To be Listed on recognized stock exchange in India (including right shares, bonus shares etc.) Purchase/Sale corporate debt; Listed or To be Listed on recognized stock exchange of India Purchase/Sale the units of mutual funds QFIs cannot Issue offshore derivative instruments / participatory notes

8 Investment Restrictions
Investment Limits as a % of paid up capital of the Company by a single QFI - 5% Aggregate by all QFIs – 10% Investment limit for corporate debt is $ 1 bn for QFIs Investment limit for Debt scheme of MF is $ 1 bn and for equity scheme is $ 10 bn The investment limits are over and above the limits of FII & NRI investment ceilings. However, sectoral cap would need to be complied.

9 Mechanics & Process Flow

10 Mechanics Open DMAT account for holding shares (Only One Permitted) Open trading a/c with recognised stock brokers (Multiple a/c permitted) Designate one overseas bank account for remittances Obtain Permanent Account Number (‘PAN’) QFI QFI shall open a single non- interest bearing Rupee account with an AD-category-I bank in India for routing the receipt and payments for transactions.

11 Process Flow… QFI to transfer funds to Bank account and instruct DP to purchase shares DP to instruct broker to purchase shares DP will make payment to broker & credit shares in DMAT account of QFI Reverse process at the time of sale & DP to remit the money to designated overseas bank account

12 Single non-interest bearing Rupee Bank
…Process Flow… QFI Overseas Bank Account Transfer of Funds Foreign inward / outward remittance through normal banking channel Outside India Request DP to Purchase Shares India DP Single non-interest bearing Rupee Bank Account Dmat Account Broker

13 Taxation & Repatriation Aspects

14 Taxation & Repatriation
DP will deduct appropriate taxes as may be applicable on the income earned by QFI Taxation will be similar to any other foreign party Indicative tax rates Payment and Repatriation QFI to make foreign inward remittance through normal banking channels in any freely convertible currency Sale proceeds will be directly credited in single rupee bank account Dividend can either be credited directly to designated overseas bank or to the domestic bank account

15 Care Portfolio Managers Pvt. Ltd.
Queries? Care Portfolio Managers Pvt. Ltd. 201, Silver Heights, TPS III, 51st Road, Borivli(w), Mumbai – 92, India | SEBI Regn. No.: INP | Disclaimer: Care Portfolio Managers Limited or any of its associates does not accept any liability for any errors or omissions in the contents of this document, and shall have no liability for any loss or damage suffered by the user, which may arise as a result of this document. This document should not be construed as any professional advice if it is received without any agreement with the addressee.

16 Signatory to IOSCO’s Multilateral MoU
Albania  France Malta South Africa Alberta Germany  Mexico Spain Australia  Greece Montenegro  Sri Lanka Austria Guernsey Morocco Srpska, Republic of Bahrain Hong Kong Netherlands Sweden Belgium Hungary  New Zealand  Switzerland Bermuda Iceland Nigeria Syrian Arab Republic Brazil India Norway Chinese Taipei British Columbia Isle of Man Oman Tanzania  British Virgin Islands Israel Ontario Thailand  Bulgaria Italy Pakistan Tunisia  Cayman Islands Japan Poland Turkey Canada Jersey  Portugal United Kingdom  China Jordan Qatar United States of America  Croatia, Kenya  Québec Uruguay Cyprus, Korea Romania West African Monetary Union Czech Republic Kuwait Russia Denmark  Liechtenstein Saudi Arabia Dubai  Lithuania Serbia, Republic of Estonia Luxembourg Singapore Finland Malaysia Slovakia Former Yugoslav Republic of Macedonia Maldives Slovenia

17 Indicative Tax Rates Nature of income Tax rate Dividend Income Nil
Long Term Capital Gain Short Term Capital Gain 15% of the gain amount (excluding Surcharge & Cess) Notes: An equity share would be considered as long term capital asset if held for a period of more than 12 months. It is assumed that the asset will be held as capital asset and the gain would be regarded as in the nature of capital gains. These are the tax rates as per Indian tax laws. The benefit under tax treaty of the investor’s jurisdiction will need to be considered separately. It will be advisable for the investor to seek an advice from the tax consultant for the tax rates applicable to the specific QFI.

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