Certifications in terms of International Business refers to those necessary forms that one needs to fill in order to carry out transactions such as remittance of funds to non-residents (Form 15CA & 15CB) or a certificate by Chartered Accountants for all the assets and liabilities of an enterprise (Net worth Certificates).
For services such as transfer pricing or certifications services, contact Starters’ CFO as we can help you with all sorts of your queries.
Sending money outside India is sometimes a daunting procedure for both foreign businesses and expatriates living in the country. There are various schemes and regulations that limit how much money can be remitted and for what purpose. Certifications help in doing this remittance.
15CA, 15CB certificates
15CA Certificate and 15CB Certificate are used to transfer funds to non residents. Finance Act, 2008 inserted a new sub section (6) to section 195 effective from April 1, 2008, which requires the person responsible for making payment to a non-resident to furnish information relating to such payments in forms to be prescribed. The Central Board of Direct Taxes (“CBDT”) has now, by notification No 30/2009 dated March 25, 2009, prescribed a new rule 37BB in the Income Tax Rules, 1962 (“the rules”) prescribing Form 15CA and Form 15CB to be filed in relation to remittances to non-residents under section 195(6) of the Income Tax Act, 1961 (“the Act”). This new rule is effective from July 1, 2009 and shall apply to all remittances being made after July 1, 2009.
One also needs to take care of Net-worth certificates important for any organization.
Process of 15CA & CB Certificate
The process that will have to be followed, before any remittance can be made, is as under—
Step 1: Obtain a certificate from a Chartered Accountant in Form No 15CB
Step 2: Furnish the information in Form No15CA (15CA Certificate online)
Step 3: Electronically upload Form 15CA on the designated website
Step 4: Take Print out of Form 15CA and file a signed copy
Step 5: Remit money to the Non Resident
Please note that all the above steps have to be undertaken before remittance of money to the non-resident.
Amended Provisions to import payments to non residents
In 2013 CBDT had notified certain 39 items of payments for which Form 15CA & 15CB was not required, however, it was then reduced to 28 items by a later Notification which had omitted 11 items of payments from the specified list. It includes
- Advance payment against imports and
- Payment towards a imports-settlement of invoice. It is pertinent to note that at that point of time Form 15CA & 15CB are required to be submitted only for those payments which are chargeable to tax in India and therefore the removal of these two items were not a matter of debate as it exists today due to amended provisions of Sec. 195(6).
Net- Worth Certificates
Net worth is the amount by which assets exceed the liabilities. In simple terms, net worth is the difference between what you own and what you owe. If your assets exceed your liabilities, you have a positive net worth. Conversely, if your liabilities are greater than your assets, you have a negative net worth. All certifications including 15CA, 15CB certificates are required to be made properly.
Net worth Certificate is an initiative set up by the federal deposit insurance corporation (FDIC) to save failing banks and thrifts that had to pay out more in interest to depositors than their gains from long-term investments.
The initiative allowed banks and thrifts who were failing in the new competitive and deregulated system to apply for financial assistance to settle the problems. Net worth certificate serves a very important purpose when it comes to VISA Application, Franchisee Application or Bank Loan Application.
Reasons to obtain Net worth Certificates
Whenever you apply for a VISA, net worth certificate serve an important purpose of determining the net worth of the individual applying for VISA or net worth of his company. Net worth Certificate is an important proof that the person or his company is in good financial position and will be able to live in the other country. Net worth Certificate for VISA purpose provides a reflection of the financial net worth of the Company. For this purpose Net-worth Certificate for Individual will solve the problem.
Once you plan to open a franchisee and have obtained good money for the same, it is net worth certificate which is to be shown and which determines the financial position of the individual who is asking to become a franchisee, in this case a franchisor asks for the net worth certificate of the individual. In the further stages, it is also needed to determine the financial net worth of the franchisee.
Bank Loan Application
At the time one files a loan application; net worth certificate is required to determine the financial position of the loan applicant. Before providing you loan bank looks for your financial history. This is done to make sure that are in a good position to take that loan. Hence a net worth certificate is required in case you apply for a loan. For Example if you are doing a partnership business and want to take loan for the same, then net-worth certificate for partnership firm is required to solve the purpose.
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