Foreign Account Tax Compliance Act (“FATCA”)
FATCA is a United States (“US”) federal law with a global outreach aimed at curbing offshore tax evasion by US persons. It was enacted by the US in 2010. FATCA requires Financial Institutions outside the US referred to as Foreign Financial Institutions (“FFIs”) to report information on financial accounts held by US persons.
The UAE signed an Intergovernmental Agreement with the United States of America on 17 June 2015 with an effective (“go-live”) date of 1 July 2014 (“UAE-US IGA”). The UAE-US IGA is a Model 1B IGA and accordingly does not provide for reciprocal information sharing by the US .
The UAE-US IGA was ratified pursuant to Federal Law No. 9 of 2016 and establishes the framework for the exchange of information between reporting UAE financial institutions (“Reporting UAE FIs”) authority to the IRS. The UAE Ministry of Finance (in its capacity as the UAE competent authority) issued guidance on the UAE-US IGA on 6 July 2015 (“ Guidance Notes”). A copy of the Guidance Notes can be found at the below link.
In the absence of an IGA, UAE Reporting FIs will need to each enter into an agreement directly with the IRS in order to avoid liability for payment of withholding tax under FATCA.
Registration and Reporting
Reporting UAE FIs must report identified US reportable accounts (or submit a notification or nil return that it does not have any such accounts). The UAE-US IGA mandates Reporting UAE FIs to submit the required information on how to access the FATCA filing portal.
Intergovernmental Agreement between the U.S and the UAE
Guidance Notes on the requirements of the Intergovernmental Agreement between the UAE and the U.S
Flowchart for identification of FATCA reporting financial institutions
If you have any questions in respect of your obligations under any of the aforementioned documents, you should consult a professional advisor.
FATCA Frequently Asked Questions (“FAQs”)
The following Frequently Asked Questions (“FAQs”) provide general guidance on the application of the FATCA UAE-US-IGA.