12. Are Reporting UAE FIs required to submit nil returns?
If a Reporting UAE FI has carried out its due diligence and identified that it does not maintain any US reportable accounts, the Reporting UAE FI is required to submit a nil return(s).
This must be completed by the Reporting UAE FI by the reporting deadline.
13. How do Reporting UAE FIs obtain access to the reporting portal?
Reporting UAE FIs may contact their relevant regulatory authority to obtain a username and password to access the reporting portal that will be used to submit returns during the reporting period.
14. Are Active NFFEs reportable for Reporting UAE FIs under FATCA?
The term Active NFFE generally refers to an entity that operates an active trade or business other than that of a financial business.
Reporting UAE FIs are not required to report information on Active NFFEs or their Controlling Persons under FATCA.
15. What if a Reporting UAE FI is unable to obtain the US TIN of a pre-existing individual or entity US reportable account?
Reporting UAE FIs were given transitional relief to obtain U.S. TINs which extended over a period ending on December 31, 2019, expiring with reporting for calendar year 2019. The first year a U.S. TIN will be required to be reported concerning a US reportable account in respect to calendar year 2020, which is due to be reported by Reporting UAE FIs by 30 June 2021.
- As of 1 January 2020, a Reporting UAE FI is no longer required to immediately close or withhold on pre-existing accounts that do not contain a U.S.TIN. In the IRS’ efforts to better understand the issues that Reporting UAE FIs face in obtaining a U.S. TIN, the IRS has developed a series of codes that may be used by a Reporting UAE FI to populate the U.S. TIN field. The use of these codes is not mandatory and does not mean that a Reporting UAE FI will not be at risk for being found significantly non-compliant due to a failure to report each required U.S. TIN. The IRS will take into account the facts and circumstances leading to the absence of the U.S. TIN, such as the reasons why the U.S. TIN could not be obtained, whether the Reporting UAE FI has adequate procedures in place to obtain U.S. TINs, and the efforts made by the Reporting UAE FI to obtain U.S. TINs.
- For example, whether the Reporting UAE FI is contacting account holders annually to request any missing U.S. TINs. The expectation is that the use of these codes will allow our tax administrations to better understand the facts and circumstances behind the missing U.S. TINs, both in general and with respect to a specific Reporting UAE FI. The TIN field code and related scenarios are as follows:
|TIN code to be reported in absence of U.S. TIN||Scenario description|
|222222222||Preexisting individual account with only U.S. indicia being a U.S. place of birth.|
New individual account that:
- has indicia of a U.S. place of birth, and
has a change in circumstances causing the self-certification originally obtained at account opening to be incorrect or unreliable, and a new self-certification has not been obtained, or
was below the threshold for documenting and reporting the account at the time of account opening and subsequently exceeded the threshold, and a self-certification has not been obtained.
Preexisting individual and entity account that:
has U.S, indicia other than a U.S. place of birth, and
has a change in circumstances, causing the self-certification or other documentation originally obtained to be incorrect or unreliable, and a new self-certification or other documentation has not been obtained, or
b. was below the threshold for documenting and reporting the account at the time of account opening and subsequently exceeded the threshold, and a self-certification or other documentation has not been obtained.
New individual and entity account that:
has a U.S, indicia other than a U.S. place of birth; and
has a change in circumstances causing the self-certification or other documentation originally obtained to be incorrect or unreliable, and a new self-certification or other documentation has not been obtained, or
was below the threshold for documenting and reporting the account at the time of account opening and subsequently exceeded the threshold, and a self-certification or other documentation has not been obtained.
Preexisting entity account with account balance exceeding $1,000,000 held by a passive NFFE with respect to which no self-certifications have not been obtained, and no U.S. indicia have been identified in relation to its controlling persons.
For pre-existing accounts where there is no U.S. TIN available and the account has been dormant or inactive, but remains above the reporting threshold, also known as a “dormant account”. For reference, the U.S. defines “dormant account” in U.S. Treasury Regulations §1.1471-4(d)(6)(ii).
It is recommended that US TINs are obtained for all US reportable accounts as Reporting UAE FIs must continue to attempt to obtain this information from the Account Holder and evidence the efforts involved in attempting to obtain the US TIN for all US reportable accounts.
16. How are joint account holders treated for FATCA reporting purposes?
With respect to a jointly held account, each joint account holder is treated as an Account Holder for purposes of determining whether the account is a US Reportable Account.
Thus, an account is a US Reportable Account if any of the Account Holders is a Specified US Person or a Passive NFFE with one or more Controlling Persons who are Specified US Persons.
For reporting purposes, each Specified US person shall be reported and as such is attributed the entire balance or value of the jointly held Financial Account, including for purposes of applying the aggregation rules.
Example: Customer A is a non-US person and shares a joint deposit account with Customer B, a US Specified Person. Each customer has a separate deposit account maintained by the same UAE FI and have the following balances:
- Customer A: $30,000
- Customer B: $40,000
- Joint account between Customer A and Customer B: $25,000
The Reporting UAE FI’s computerized system links the Financial Accounts and allows account balances or values to be aggregated. The balance of the joint account is attributable in full to each of the account holders. The aggregate balance for Customer A is $55,000 and for Customer B is $65,000.
The joint account is a US Reportable Account and Customer B’s aggregate balance shall be reportable ($65,000).
17. How is information exchanged under FATCA?
Reporting UAE FIs must report the details of US Reportable Accounts by the requisite deadline. This information is transmitted to the UAE MoF which will in turn exchange the information with the US IRS on an automatic basis.
18. When is the reporting due date for FATCA in the UAE?
The FATCA reporting deadline for Reporting UAE FIs to report is 30 June of the year following each reporting period unless the reporting deadline has been extended as communicated by your regulatory authority.
Your regulatory authority will provide you with further information in case there is a change to yearly reporting deadlines.
19. Can a third-party service provider fulfil the FATCA due diligence and reporting obligations on behalf of UAE FIs?
The UAE-US IGA provides that Reporting UAE FIs may use third-party service providers to fulfill obligations under the IGA (e.g. fund managers on behalf of funds and trustees on behalf of trusts), but these obligations shall remain the responsibility of the Reporting UAE FI. Any failure by a third-party service provider would be regarded as a failure by the Reporting UAE FI.
It is not required that the service provider be within the same jurisdiction as the Reporting UAE FI or obtain approval from the relevant regulatory authority of the UAE FI to act as a service provider for the FI.
20. If an entity that is a Reporting UAE FI is liquidated on 31 March 2020, is the Reporting UAE FI still required to file a FATCA return for calendar year 2020 by 30 June 2021?
A Reporting UAE FI would be required to fulfill its reporting obligations until the date it ceases to be a Reporting UAE FI (e.g. due to liquidation or closure). Therefore, if the entity is a Reporting UAE FI in calendar year 2020 (i.e. between 1 January 2020 - 31 December 2020), it would be required to submit a FATCA return for calendar year 2020 by 30 June 2021 (or a nil return, if applicable).
Hence, if the entity was considered a Reporting UAE FI up to the point of liquidation on 31 March 2021 (and therefore a Reporting UAE FI at a point during calendar year 2020), the entity would be required to submit a FATCA return for calendar year 2020 by 30 June 2021 (or a nil return, if applicable).
21. If an entity that is a Reporting UAE FI is liquidated, what are the responsibilities of the Reporting UAE FI to ensure the FATCA account is closed?
It is the Reporting UAE FI’s responsibility to notify the relevant regulatory authority that it has been liquidated and ensure that FATCA Financial Accounts are closed and subsequently that the Reporting UAE FI is deregistered from the regulatory authority’s FATCA reporting portal.
Unregulated Entities which are Reporting UAE FIs must notify the UAE Ministry of Finance (in its capacity as a regulatory authority for Unregulated Entities) that it has been liquidated and ensure that the FATCA Financial Accounts are closed.
A Financial Account is treated as a Reportable Account as of the date it is identified as such pursuant to the due diligence procedures under the FATCA legislation. A Reportable Account remains reportable until the date it ceases to be a Reportable Account (e.g. due to the closure of the account). If a Reportable Account is closed due to the liquidation or winding up of the Reporting UAE FI, information with respect to such account remains annually reportable until the date of closure of the Financial Account by the Reporting UAE FI in the framework of the liquidation or the winding-up.
It is also the responsibility of the Reporting UAE FI to deregister from the US IRS FATCA portal.
22. Do Active Non-Financial Foreign Entities (“NFFEs”) or Passive NFFEs have reporting obligations under FATCA?
Under FATCA, a UAE FI includes any entity that:
- accepts deposits in the ordinary course of a banking or similar business (a Depository Institution);
- holds financial assets for the account of others as a substantial portion of its business (a Custodial Institution);
- is engaged primarily in the business of investing, reinvesting, trading securities, partnership interests, commodities or similar financial instruments (an Investment Entity); or
- issues or makes payments in respect of insurance or annuity contracts (a Specified Insurance Company).
Entities which are not UAE FIs are considered NFFEs for the purposes of FATCA. This could be an Active NFFE or Passive NFFE as defined under the UAE-US FATCA Intergovernmental Agreement (“IGA”).
Active or Passive NFFEs do not have reporting (or nil return) filing obligations under the UAE-US FATCA Intergovernmental Agreement (“IGA”).
23. What is the process for submitting a nil return for FATCA purposes?
If you are a Reporting UAE FI, you must file annual returns (or a nil return, if applicable), to the applicable regulatory authority in the UAE (or the UAE Ministry of Finance if you are an Unregulated Entity) by the stipulated deadline.
The nil reporting requirement is a 'tick the box' exercise in the FATCA portal and no documentation is required to be submitted at the present time (although this may be subject to change in the future).
Key FATCA abbreviations and defined terms
|FATCA||Foreign Account Tax Compliance Act|
|FFI||Foreign Financial Institution|
|GIIN||Global Intermediary Identification Number – A number assigned to financial institutions by the US Internal Revenue Service|
| IRS|| US Internal Revenue Service|
| New Account||Any financial account opened at a UAE FI on or after 1 July 2014|
|NFFE||Non-Financial Foreign Entity|
|NPFI||Non-Participating Financial Institution|
|Pre-existing Account|| Any financial account maintained at an UAE FI as at 3o June 2014|
| UAE-US IGA||Intergovernmental Agreement - The agreement concluded by the US and the UAE for FATCA|
| UAE MoF||UAE Ministry of Finance,/td> |
| US TIN||Tax Identification Number is an identification number used by the IRS to administer their tax laws.|
For all other defined terms, refer to the UAE-US IGA