UAE, US join hands for tax compliance

Account details of US citizens to be monitored.

Barbara A. Leaf and Younis Haji Al Khoori signing the agreement to implement the Foreign Account Tax Compliance Act in Abu Dhabi on Saturday. Supplied photo

Abu Dhabi: The UAE and the United States signed an agreement on Saturday to implement the Foreign Account Tax Compliance Act (FATCA), the Ministry of Finance (MoF) announced.

Younis Haji Al Khoori, Undersecretary of MoF, and Barbara A. Leaf, US Ambassador to the UAE, signed the agreement in Abu Dhabi.

FATCA was enacted by the US Congress in 2010 to target non-compliance by US taxpayers using foreign accounts. The US law requires foreign financial institutions to provide annual reports on account information of customers who are US citizens.

Al Khoori said: “The country was keen to sign this agreement to protect UAE financial institutions. In the case of non-compliance with the requirements of FATCA, any non-US financial organisation could face a 30 per cent penalty on certain financial returns of its operations in the US market.”

Al Khoori added: “The Ministry will continue to meet all requirements for linking UAE government financial institution systems to the FATCA e-system. The Ministry will also determine the processes for monitoring reporting by financial institutions.”

Leaf said: “FATCA is becoming the global standard in the effort to curtail tax evasion. This agreement reflects the UAE’s commitment to the adoption of best practices as well as the growing strength and breadth of our bilateral relationship.”

Under the intergovernmental agreement, the first report, for 2014, must be submitted to the United States by September 30, 2015.

The agreement exempts certain government institutions, sovereign funds and international organisations from reporting requirements. The US law requires foreign financial institutions to submit reports directly to the US Treasury Department or via the foreign government, providing information about financial accounts held by US persons or by certain foreign companies with one or more US shareholders that own more than 10 per cent of the company.

As per the UAE Cabinet decision, the MoF was chosen to implement the FATCA Model 1 intergovernmental agreement and provide the required information to the US Treasury Department.

The Model 1 FATCA agreement was initialled by the UAE and the United States on May 21, 2014, following approval from local governments.

haseeb@khaleejtimes.com