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FATCA – UAE on proper path to sign as well

(Dubai, 08/09/2013) According to various publications and press releases of the UAE Central Bank, the bi-lateral signing of Foreign Accounts Tax Compliance Act (FATCA) between the U.S. and UAE can be expected before the end of 2013.

The Governor of the UAE Central Bank, H.E. Sultan Bin Nasser Al Suwaidi, stressed already in March 2013 during a FATCA seminar in Abu Dhabi [supported by Patton Boggs LLP and Deloitte] on the need for the regulatory authorities in UAE to formulate procedures to facilitate compliance with the U.S. FATCA and set clear instructions for financial institutions under their supervision, in line with the requirements of FATCA [seen from him as a "law"!].

Al Suwaidi said that the competent authorities in UAE are considering signing an agreement with the Government of the United States of America for FATCA Compliance. Experts speaking at this seminar recommended signing a Model 1 Intergovernmental Agreement (IGA) with the United States Government, which they considered to be the best available option to deal with FATCA.

FATCAUS Treasury Department Assistant Secretary for Tax Policy, Mark Mazur, already stressed the US governments pleasure about this development: "We appreciate the Central Bank of the United Arab Emirates (UAE)'s leadership on FATCA and are pleased to have reached this important milestone with the UAE. We look forward to beginning negotiations on an intergovernmental agreement in order to implement FATCA effectively and efficiently in the UAE" [why should he complain?].

 

 

 

What does this mean for U.S. taxpayers and/or U.S. green card holders?

In case of unreported income, this is a major game changer! If you haven’t already heard, FATCA has enabled the IRS to assess severe penalties for failure to comply with existing regulations, and also set in place additional requirements.

Examples:

  • Did you know, if you have not been filing a Report of Foreign Bank & Financial Accounts (FBAR), you could face a penalty as high as $100,000 or 50% of the account balance.
  • Did you know, U.S. Expats and Green Card Holders are required to report all of their foreign held financial assets, including offshore savings plans, portfolio bonds, whole life insurance and national bonds, and that such investments are taxed very heavily as Passive Foreign Investment Companies (PFIC)?
  • Did you know, every UAE bank is now required to report the accounts of all U.S. taxpayers directly to the IRS, or they could lose U.S. Dollar clearing rights in New York?

It is important that all U.S. taxpayers in the UAE are fully aware of what these changes mean for them.

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