Tax Residency Certificate - A pre-requisite to claim Tax Credit under Double Taxation Avoidance Agreement

In exercise of the powers conferred to it by section 90 and 90A read with section 295 of the Income-tax Act, 1961 the Central Boards of Direct Taxes has notified a circular dated 17/09/2012 making it mandatory from 1st April, 2013 for all foreigners to furnish a tax residency certificate of their home country to claim benefits under the Double Taxation Avoidance Agreement.

While at present, there is no requirement prescribed under the law to furnish a Tax Residency Certificate (TRC) from the country of residence to claim treaty benefits, the revenue authorities generally use to ask for such a certificate arbitrarily and foreigners finds themselves at the hands of Tax authorities without knowing in advance the requirements for claiming tax credits. Hence, said notification is expected to benefit the foreign investors, who will have clear understanding of the pre-requisites to claim tax credits under Double Taxation Avoidance Agreement.

The Tax Residency Certificate as mentioned above shall contain the following particulars, namely:-

1. Name of the assessee;
2. Status (individual, company, firm etc.) of the assessee;
3. Nationality (in case of individual);
4. Country or specified territory of incorporation or registration (in case of others);
5. Assessee’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;
6. Residential status for the purposes of tax;
7. Period for which the certificate is applicable; and
8. Address of the applicant for the period for which the certificate is applicable;

The same certificate referred to above shall be duly verified by the Government of the country or the specified territory of which the assessee claims to be a resident for the purposes of tax.