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UAE Strike A Tax Evasion Agreement With The USA
The UAE has signed an agreement with the US on curbing tax evasion of US citizens through a financial data sharing program.
The Ministry of Finance on Tuesday issued an announcement that the countries (US and UAE) had agreed on an IGA (Intergovernmental Agreement) towards implementing US’s FATCA (Foreign Account Tax Compliance Act). The US law targets at collecting up to and over $100 billion annually from US citizens who evade taxation by concealing assets and incomes offshore.
The ministry stated that the new agreement is set to follow “Model 1” –type agreement of FATCA, whereby the ministry bargains for the exchange of information and data with the Treasury Department of the US.
The US had put in place a 1st July deadline before which American banks were required to hold back some payments to financial institutions in countries that do not have a FATCA agreement.
The Ministry of Finance announced that the UAE agreement was a reaffirmation of the commitment of the emirates in strengthening the stability and growth of its financial sector.
In May, UAE’s Central Bank had issued a statement to financial institutions that have branches/ subsidiaries abroad to submit registration to US tax authorities so as to obtain their GIIN (Global Intermediary Identification Number).
The notice 150/2014 of the central bank noted that financial institutions and banks that do not have subsidiaries or branches abroad would have up to 31st December to register.
UAE Cabinet’s Decision No. (100/5 and 2) had provided that the Ministry of Finance would be the designated authority to negotiate with the US Treasury in signing an agreement on FATCA compliance.
The agreement is pursuant to UAE’s commitment of encouraging and supporting financial institutions and banks, as well as helping them in implementing the requirements of the law for purposes of strengthening the position of the country as a leading global financial hub.
The agreement signed is an initial agreement, but even so the UAE would be considered to have a fully effective IGA.
Meetings and business workshops will be conducted by the UAE officials at different committee levels during the coming months to finalize all required procedures in regards to signing the final draft of the agreement.
Official reports from the US government indicate that over 77,000 banks as well as other financial institutions from across the globe have joined US in its struggle towards countering tax evasion. For purposes of clamping down tax evasion, the US government has also specifically targeted tax havens such as Switzerland.
The country’s fight against tax evasion has been quite successful. For instance, a $2.6bn fine was imposed on Credit Suisse earlier this year for its active efforts of helping Americans to conceal money thereby evading tax.