UAE and US Sign FACTA Agreement

The UAE and US have signed an agreement to implement America’s Foreign Account Tax Compliance Act (FATCA). Under this agreement the UAE based financial accounts of US citizens in the Gulf state will now be provided to the American government.

Enacted by US Congress in 2010, FACTA targets non-compliance by US taxpayers using foreign accounts. The US law requires foreign financial institutions to provide annual reports on account information of customers who are US citizens and provides penalties for institutions that do not comply. Under the agreement, the UAE financial institutions must provide the US Treasury Department a report of the financial accounts held by US citizens or by certain foreign companies which have one or more US shareholder who owns more than 10 percent of the company by September 30, 2015. This first report will be based on accounts and ownership held by US taxpayers in 2014.

Certain government institutions, sovereign funds and international organizations are exempt from the reporting requirements.

US citizens, residents and certain nonresident individuals who hold non US financial accounts are required to report their interests in those accounts annually using form IRS form 8938 if the reporting thresholds (shown below) are met.

Please note that form 8938 does not replace the requirements to report foreign financial accounts on form FinCEN 114 (commonly referred to as an FBAR) and accounts may need to be reported on both forms.