The UAE earlier announced it is gearing up to sign on to FATCA compliance. For anyone not “in the know”, FATCA stands for the “Foreign Account Tax Compliance Act,” a draconian United States law enacted in 2010 and being implemented in stages. FATCA is designed to carefully monitor the financial transactions of US persons with non-US financial assets. Under FATCA, as enacted, foreign (non-US) financial institutions are generally required to provide directly to the US Internal Revenue Service (IRS) information about accounts held by Americans. Reporting will include the name, address and taxpayer identification number of each US account holder; the account number; account balance and value; the account’s gross receipts and gross withdrawals or payments; and other account related information requested by the IRS. If the institutions do not comply, they will be hit with a 30% withholding tax on payments from US-sources, including proceeds on sales of US stocks and securities (effectively cutting the institution off from any profitable US investment opportunities).
The UAE Central Bank Governor, Sultan bin Nasser Al Suwaidi, has said that the country is considering signing a so-called “Intergovernmental Agreement” (IGA) with the United States in order to facilitate compliance with FATCA. Governor Al Suwaidi stressed the need for the regulatory authorities in the UAE to prepare procedures to facilitate FATCA compliance and set clear instructions for financial institutions under their supervision. In response, the US Treasury Department Assistant Secretary for Tax Policy, Mark Mazur, said that the US Treasury appreciated the UAE Central Bank’s leadership on FATCA. The Department of the Treasury added that it was pleased to have reached this important milestone with the UAE. “We look forward to beginning negotiations on an intergovernmental agreement in order to implement FATCA effectively and efficiently in the UAE”, he added. The US Treasury has publicly acknowledged its expectation that the UAE will live up to its stated commitment and sign on to FATCA compliance. Read more