FATCA – Foreign Account Tax Compliance Act
Moving towards a new international banking realty
The staggered implementation of a new tax compliance act by the United States known as FATCA (Foreign Account Tax Compliance Act) has been raising concerns and causing controversy in banks, financial institutions and private companies across the world. The US has postponed implementation of the law in some areas to allow government agencies time to introduce the necessary changes.
More than 77 banks around the world have agreed to implement the law in cooperation with Washington, based on the fact that an apparent USD 100 billion in taxes is currently not being paid on United States citizens’ accounts outside of the USA. This amounts to 4.3 percent of the total tax revenue collected by the Federal Government.
The implementation of this law is causing some commotion in Arab countries, as financial institutions face continuing difficulty in identifying US American citizens. These citizens are generally Arab citizens holding dual citizenship. It may be the case that these citizens themselves are unaware that they are obliged to pay USA tax if they no longer live in the USA or were only born there. USA tax laws differ from most in that US American citizens are obliged to file taxes in the US regardless of where they live.
DORCHESTER Magazine has conducted numerous interviews in Arab countries and abroad to find out more about the law, its implementation, applications and implications. Saudi Arabia, Kuwait, UAE, Egypt, Lebanon, Qatar, US, UK, and China have all signed the FATCA agreement and banks have met the requirements of the law. FATCA is intended to help reduce international tax evasion and place limitations on tax havens such as Bermuda, the Cayman Islands, Luxembourg, Gibraltar and the British Virgin Islands. It is intended to introduce a new taxation reality and the number and status of countries around the world that have signed the agreement means that evading tax has become a far more difficult feat.