The United Arab Emirates (UAE) has become the latest country to strike a tax information- sharing agreement with the United States under a law aimed to combat offshore tax dodging by Americans.
The UAE and the US signed an agreement here on Saturday on sharing information about US taxpayers who have finances in the Gulf country, state news agency WAM reported.
Undersecretary of the UAE Ministry of Finance Younis Haji Al Khoori and US Ambassador in Abu Dhabi Barbara A. Leaf inked the deal that is aimed to facilitate the implementation of the US Foreign Account Tax Compliance Act (FATCA) in the Arab country.
The FATCA was enacted by the US Congress in 2010 to target non-compliance by American taxpayers who use foreign accounts. The US law requires foreign financial institutions to provide annual reports on account information of customers who are US citizens, as defined by law.
The UAE was keen to sign this agreement to protect its financial institutions, Al Khoori said.
In case of non-compliance with the requirements of the FATCA, any non-US financial organisation could face a 30 per cent penalty on certain financial returns of its operations in the US market.
Al Khoori added, "The Ministry will continue to meet all necessary requirements for linking UAE government financial institution systems to the FATCA e-system. The Ministry will also determine the required processes for monitoring reporting by financial institutions."
There are over 50,000 US Americans residing in the UAE.
Leaf, the US diplomat said that the FATCA has become a global standard in the effort to curtail tax evasion.
"This agreement reflects the UAE’s commitment to the adoption of best practices as well as the growing strength and breadth of our bilateral relationship," he said.
Under the intergovernmental agreement, the first report, for 2014, must be submitted to the US by September 30, 2015.
The agreement exempts certain government institutions, sovereign funds and international organisations from the reporting requirements.
Over 50 countries and regions have inked inter- governmental agreements with the US on the implementation of FATCA, most of which have not entered into force.