UAE, US sign tax agreement

The UAE has signed an agreement with the US to implement the Foreign Account Tax Compliance Act, the ministry of finance said in a statement published by official news agency WAM.

Under FATCA, all the financial institutions in the UAE are required to provide information of financial accounts held by US citizens in the UAE and companies who have US shareholders with a stake of 10 per cent.

The financial institutions are required to submit these reports directly to the US Treasury, the statement added.

However, certain government institutions, sovereign wealth funds and international organisations do not have to disclose their financial details.

FATCA was first enacted by the US Congress in 2010 in order to crack down on non-compliance by US taxpayers who use foreign accounts.

“The country was keen to sign this agreement to protect UAE financial institutions,” said Younis Haji Al Khoori, undersecretary of MoF.

“In case of non-compliance with the requirements of FATCA, a non-US financial organisation could face a 30 per cent penalty on certain financial returns of its operations in the US market.

“The ministry will continue to meet all necessary requirements for linking UAE government financial institution systems to the FATCA e-system. The ministry will also determine the required processes for monitoring reporting by financial institutions.”

FATCA, which helps build up transparency, is also expected to impact companies which are not in the financial services sector both in and outside of the US.

But despite its obvious benefits in reducing tax evasion, FATCA’s strict disclosure rules could likely increase financial liabilities for Americans living or investing abroad.

The new regulations might especially require those citizens who have not disclosed their financial accounts to pay more taxes in accordance with US regulations.

Last year, a survey conducted by financial consultancy de Vere group among American expats found that 73 per cent of them are considering relinquishing their US citizenship in order to escape FATCA regulations.