The signing of the FATCA accord by Kuwait, Qatar and the United Arab Emirates signals an end to Middle Eastern resistance to FATCA reporting. As a direct result, many Americans of Middle Eastern descent with financial accounts in multiple countries will need help with FBAR compliance.
FATCA Accord & The Middle East
FATCA requires Foreign Financial Institutions to report to the IRS information on assets of $50,000 or more held by US taxpayers, or by foreign entities in which US taxpayers hold substantial ownership interest. Failure of an FFI to submit information could result in a 30% withholding tax being levied on US source payments. Furthermore, it also can result in the potential loss of correspondent banking relationships.
Before signing the FATCA Accord, the Kuwait finance ministry established a committee made up of representatives of the ministry’s tax department, the Foreign Ministry, the Central Bank of Kuwait, and the Kuwait Banking Association. The financial institutions were required to disclose information on their American clients and register with the IRS before May 5, 2014. In a statement explaining the motivation behind the decision, the finance ministry pointed out that 26 European countries have signed FATCA agreements with the US, and 19 other countries are in the final stages of negotiations.
United Arab Emirates & FATCA
In regards to the United Arab Emirates recent signing that came right after Qatar came on board, Younis Haji Al Khoori, undersecretary at the UAE Ministry of Finances, explained, “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 organization 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 challenge with the multitude of new FATCA Accord signings from the Middle East is how many taxpayers with dual citizenship were unaware of how to comply with FBAR reporting. There are a number of individuals who have dual citizenship that did not know about filing requirements. The goal of the international tax team at LSL CPAs is to help such dual citizens and other people with foreign account holdings to become compliant with both IRS and Treasury requirements.
