Hundreds of Gulf expats could be liable as US looks to expand the tax net
The US government is scrutinising UAE expats’ bank accounts in a bid to clamp down on tax evasion.
Strict new rules that came into effect last year mean US expats who have retained dual nationality, and Gulf-based nationals born in the US or to an American parent, could be US tax evaders without realising it.
The Foreign Accounts Taxation Compliance Act (Fatca) was quietly enacted in 2010, and, after a four-year ramp-up, begun to be implemented at the end of last year.
It requires all foreign banks to disclose the financial information of any American with assets over $50,000 sitting in banks outside the US.
If a foreign bank fails to report an American customer to the Internal Revenue Service (IRS) – the US Treasury department – can penalise the bank by withholding 30 percent of its income.
The US government is policing foreign banks aggressively, with implications for expats living in the UAE and elsewhere. Under pre-existing US tax law, American citizens or resident aliens of the US who are living abroad must pay tax on any income over $99,200 (Dh364,064) per year. Tax evasion is a felony that could land a person in jail.
Giovanni Rossi, managing partner at Bonnard Lawson International Law Firm in Dubai, told Arabian Business that the new law is likely to hit hundreds of Gulf-US dual nationals. He said he has already resolved 40 such cases by negotiating with the IRS so only the interest and penalties on non-declared funds need to be paid.
“Although I am not aware of the official numbers, it is reasonable to assume that this phenomenon is quite widespread in the Middle East. For example, there are more than 200,000 Saudis in the UAE [who were perhaps born in the US or to American parents] who have the potential to have US citizenship,” said Rossi.
He urged anyone affected by the clampdown to submit the necessary papers to the IRS.
“There is an obligation for anyone living in the UAE who could still be classed as an American citizen to disclose details of money held outside the US as soon as possible.”
