The UAE Ministry of Finance announced, on 18 June 2015, the signing of an intergovernmental agreement (IGA) with the US to facilitate implementation of the US Foreign Account Tax Compliance Act (FATCA).
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 (FFIs) to provide annual reports in respect of accounts held by US persons or companies with one or more US shareholders that own more than 10% of the company.
Undersecretary of the Ministry of Finance Younis Haji 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% 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 requires FFIs to submit reports either directly to the US government (Model 1 IGA) or indirectly via their national reporting authority for onward transmission to the US government (Model 2 IGA). The UAE Cabinet opted, on 14 April 2013, to implement the Model 1 IGA. Under the agreement, the first report, concerning 2014, must be submitted to the US by 30 September 2015.