Partners against crime: UAE, US sign innovative agreement on tax evasion
The UAE has reached an initial agreement with the US to carry out a financial data-sharing programme aimed at curbing offshore tax evasion by US citizens.
The Ministry of Finance announced on Tuesday that the two countries had negotiated an Intergovernmental Agreement (IGA) in substance to implement the US’s Foreign Account Tax Compliance Act (Fatca). The US law aims to plug as much as $100 billion a year of lost tax revenue from US citizens concealing incomes and assets offshore.
The ministry said that the new agreement would follow Fatca’s “Model 1”-type agreement, where the ministry negotiates the exchange of data and information with the US Treasury Department. In the alternative “Model 2”, financial institutions report directly to US tax authorities.
The US had set a deadline of July 1 before American banks were to be required to withhold some payments to the financial institutions of countries without a Fatca agreement.
The Ministry of Finance said in its announcement of the UAE’s agreement that it reaffirmed the emirates’ commitment to strengthening the stability of its financial industry. It would reduce the burden of Fatca for banks and financial institutions operating throughout the emirates, the ministry said.
In May, the Central Bank of the UAE had informed banks and financial institutions with branches or subsidiaries abroad to register with US tax authorities and obtain their “Global Intermediary Identification Number”, or GIIN.
The central bank’s notice, 150/2014, said banks and financial institutions without branches or subsidiaries abroad would have until December 31 to register.
The UAE Cabinet’s Decision No. (100/5 and / 2) for 2013 had designated the Ministry of Finance as the authority responsible for negotiating with the US Treasury to sign a draft agreement on compliance with Fatca.
The ministry said the agreement was in line with the UAE’s commitment to encourage and support banks and financial institutions, as well as help them implement the law’s requirements in order to strengthen the country’s position as a global financial centre.
Obaid Humaid Al Tayer, Minister of State for Financial Affairs, said the agreement was only an initial one, but the UAE would nevertheless be treated as having a full IGA in effect.