CBDT Notification Regarding “Certificate of Tax Residency” For DTAA

S. 90 (4) of the Act, as inserted by the Finance Act 2013 w.e.f 1.4.2012 provides that an assessee, not being a resident, to whom an agreement referred to in sub-section (1) of s. 90 applies, shall not be entitled to claim any relief under a Double Taxation Avoidance Agreement unless a certificate, containing such particulars as may be prescribed, of his being a resident in any country outside India or specified territory outside India, as the case may be, is obtained by him from the Government of that country or specified territory. A similar provision has been inserted in sub-section (4) of s. 90A of the Act. Pursuant therto, the CBDT has issued Notification dated 17.09.2012 to insert Rule 21BA and Forms 10FA and 10FB specifying the manner in which the aforesaid Certificate of Tax Residency should be obtained

Euro Down On Growing Spanish Concerns, Yen Steady

The Euro fell to a 1-week low against the Dollar during early trading on Tuesday after a short term recovery. Growing concerns about Spain's debt problems persisted and weak German business data did little to allay fears of slowing growth.

Meanwhile, the Japanese Yen drew back against the US Dollar and the Euro, but managed to eventually claw its way back later in the day.

 

Data due out today, is forecast to show that French business confidence has worsened. Yet more reports could show that consumer sentiment in Germany and Italy has all but stagnated.

I foresee that because any signs of improvement in the Euro zone economies are few and far between, we could see that sentiment will keep the Euro under pressure in the near term.

Some leading economists are predicting that the Euro members will have to share debts and speed the creation of a banking union, in order to prevent a situation in which "the whole system falls apart".

Spain has not yet decided whether it needs a full rescue, while discussions remain inconclusive as between Greece and its lenders, on how to meet bailout commitments.

The Euro was virtually unchanged earlier at $1.2932, slightly up from $1.2891 yesterday, it lowest level since the 13th of September. A Euro bought 100.69 Yen.

The Yen fetched 77.85 per Dollar earlier today, its strongest level since the 14th of September, as demand was boosted for Japan's currency as a refuge.

Euro Falls To Recent Lows, Investors Wary Of Yen

The Euro went on to re-test its recent low versus the US Dollar during early trading on Monday after growing uncertainty over Spain and Greece hampered the currency.
Meanwhile the Japanese Yen was helped by Japanese repatriation ahead of the half-year book-closing due at the end of this month. Investors remain wary about a possible Japanese intervention kept the currency under control.

 

The Yen was at its strongest in over a week against the Euro earlier today. This was ahead of a report due today, that may indicate that business confidence in Germany is near to its lowest level in more than two years.

The Ifo institute's business climate index is expected to come in at 102.5 for September. The index had fallen to 102.3 in August, its lowest level since March 2010. The index is a gauge of confidence among German executives.

On Friday Greece's troika of creditors: the International Monetary Fund (IMF), the European Central Bank (ECB) and the European Commission, announced that they will take a "brief pause" for a week after making "good progress" in talks around Greek budget cuts.

The market is still absorbing the effects of Spain possibly seeking a bailout and as a result of a confluence of factors, what I expect to see is that investors will regard the Yen as the current best safe haven. The Yen usually strengthens during periods of financial turmoil as Japan isn't reliant on foreign capital due to its current account surplus.

The Fundamentals in Europe are looking weak, mainly because of austerity measures.

The Yen gained 0.4% to 101.04 per Euro earlier today, near to its strongest level since the 14th of September. The Yen reached 78.05 per Dollar, 0.1% higher than its close on Friday.

The Euro declined 0.3% to $1.2944.

The Bank of Japan (BOJ) released its August minutes earlier today that show that Japan's economy has returned to a recovery path and that it will implement monetary easing seamlessly.

Withholding tax on Foreign Borrowings has been reduced.

Despite a series of controversial reforms undertaken recently the government is unfazed. It has decided to continue with its growth supportive steps ignoring any political ramifications. In that regard, it has formally approved a cut in the tax rate on interest paid to overseas lenders. The proposal to cut the tax rate was already made in the Union Budget. But the formal announcement came on Friday. It may be noted that the withholding tax on foreign borrowings has been reduced to 5% from the earlier figure of 20%. The tax holiday period will range from July 2012 to June 2015. A cut in the tax rate will attract more debt refinancing via External Commercial Borrowings (ECBs). This will attract capital into the country. It will also reduce interest rates as the tax benefits get passed on to the local borrowers. The move will be particularly beneficial to the companies from the infrastructure sector because they borrow heavily from the overseas markets.  

U.K. deficit hits August record.

 So much for austerity - the U.K.'s budget deficit increased to £14.41B in August from £14.37B in the same month last year. The latest figure is the highest for August since records began in 1993, and was caused by a 2.1% fall in corporation tax receipts and a 4.9% increase in benefit payments.

Eurozone PMI points to recession.

 Eurozone manufacturing PMI increased to a preliminary 46 in September from 45.1 in August, although composite output fell to a 39-month low of 45.9. The flash PMI is consistent with GDP of -0.6% in Q3, "sending the region back into a technical recession," says Markit. German manufacturing PMI improved but still contracted, while France's manufacturing output slumped to 39.8 vs 45.3, suggesting that the country is also heading for recession

BOJ Sparks Fizzle Out, Spanish Bond Auction Up Next

The Japanese Yen blasted off against the US Dollar during early trading on Thursday, after reaction to the Bank of Japan's monetary easing fizzled out.

Meanwhile, investors are waiting to see if Spain will seek a bailout and kick-start the European Central Bank's bond-buying programme. Another key near-term focal point is an auction of Spanish bonds scheduled to take place today.
PMI Data anticipation keeps Euro down
Data is due out today which is expected to show that European services and manufacturing have contracted. This would add to evidence that the region's debt crisis is stunting growth. Ahead of the data, the Euro fell against both the Dollar and Yen
Most economists are expecting that a Euro zone composite index for services and manufacturing industries in September, due for release by London-based Markit Economics today, was below 50, signalling contraction.

If this turns out to be the case, then I foresee that the European economy will worsen before getting any better.

Also on the agenda today is an auction by Spain, the fourth largest economy in the Euro bloc, of its 3 and 10 year notes.

Since the European Central Bank (ECB) unveiled a limitless bond purchase program on the 6th of September, which was aimed at lowering government borrowing costs, Spain's benchmark 10 year yield has dropped to 5.7% from an Euro-era record of 7.75% in July.

Spain could consider a bailout if it determines that the conditions imposed are acceptable, according to Deputy Prime Minister Soraya Saenz de Santamaria.

Should we see a poor auction result today, ironically this may be positive for the Euro as it would incentivise Spain to ask for assistance sooner than it might otherwise have planned.

Earlier today the Euro dipped 0.8% to 101.5 Yen and was down 0.4% to $1.2995. The Yen rose 0.3% to 78.13 per Dollar.

The Yen has risen against all of its 16 major peers. This is mainly as a result of speculation that the recent unexpected expansion of monetary stimulus by the Bank of Japan (BOJ) might do little to spur economic growth. This could be true I think, in light of a current territorial dispute with China and general weak global demand which impacts negatively on exports.

Japan's Finance Ministry announced earlier today, that its trade deficit has widened to 754.1 billion Yen in August.

The Aussie came under pressure, after a private survey has shown that China's manufacturing may shrink for an 11th successive month. This has dimmed prospects for China's exports and, as China is Australia's largest trade partner, the outlook reflects negatively on the Aussie.

The Aussie earlier was down 0.7% at $1.0403.