Final regulations on setting-up of BATF in the IFSC

 On March 26, 2024, the International Financial Services Centres Authority (“IFSCA”) had released a consultation paper on setting-up of an entity in the International Financial Services Centre (“IFSC”) to provide Book-keeping, Accounting, Taxation and Financial Crime Compliance Services (“BATF”) either as a captive service provider to the group or to third party clients. Based on the comments received, the IFSCA has now notified final IFSCA (BATF) Regulations, 2024 (“BATF Regulations”).

 

The BATF Regulations aim to create a framework for setting-up of support services entity in the IFSC, for all non-resident entities operating in any sector including the non-financial services sector. This would enable any non-resident to set-up an entity in the IFSC to provide BATF services to its offshore group or third party clients and obtain various indirect tax and state government incentives apart from the 10 year income tax holiday.

 

The BATF Regulations are broadly in line with the consultation paper issued by the IFSCA, with a few key changes to make the regulations simpler for existing entities set-up in the IFSC. The key features of the BATF Regulations are summarized as under:

 

• Entities eligible for registration: Any entity intending to provide BATF services can set-up a Company or LLP in the IFSC and obtain registration as a BATF under the BATF Regulations (branch structure is not permitted). Further, existing entities in IFSC registered as an Ancillary Service Provider (“ASP”) can communicate their willingness to provide BATF services to the IFSCA within 60 days, post which they can provide BATF services under their existing ASP registration. However, the activities of the entity as a BATF service provider and as an ASP should be ring-fenced;
• Eligible Service Recipients: BATF Services can be provided to any non-resident (irrespective of the sector of its operations) who are not from high-risk jurisdictions identified by the FATF;
• Key Managerial Personnel: The IFSC entity which has obtained registration under BATF Regulations must appoint a Principal Officer and a Compliance Officer, who meet specific qualification and experience requirements;
• Transfer of existing contracts: BATF Regulations provide that transferring existing contracts or work arrangements and workforce from group entities in India to the IFSC entity is not permitted;

Minimum office space criteria: The BATF Service Provider shall ensure office space in IFSC of minimum carpet area computed at 60 sq.ft. per employee