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Qualified Foreign Investor (‘QFI’)

Qualified Foreign Investor (‘QFI’). December 2012. Contents. Background Investment Conditions Mechanics & Process Flow Taxation & Repatriation. Background. Introduction…. An Opportunity for the Foreign Investors to invest directly in Indian listed companies. Who is a QFI ?.

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Qualified Foreign Investor (‘QFI’)

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  1. Qualified Foreign Investor(‘QFI’) December 2012

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

  3. Background

  4. Introduction… An Opportunity for the Foreign Investors to invest directly in Indian listed companies

  5. Who is a QFI ? *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 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. …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 Single non-interest bearing Rupee Bank Account DP Dmat Account Broker

  13. Taxation & Repatriation Aspects

  14. Taxation & Repatriation Taxation • 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. Queries? Care Portfolio Managers Pvt. Ltd. 201, Silver Heights, TPS III, 51st Road, Borivli(w), Mumbai – 92, India +91 22 2899 3700| info@carepms.com SEBI Regn. No.: INP 000004128 | www.carepms.com 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

  17. Indicative Tax Rates • 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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