UAE signs FATCA agreement

The US government agreed to treat an intergovernmental agreement (IGA) with the United Arab Emirates (UAE) as being completed for purposes of the Foreign Accounts Tax Compliance Act (FATCA).

The UAE, whose IGA is said to be agreed “in substance”, negotiated a “Model I” type agreement – meaning firms in the emirates will report tax information on any US account holders to local authorities, who will then share that information with the US. In return, the US Internal Revenue Service will collect and share data on UAE foreign account holders in the US.

FATCA requires non-US financial firms to report the holdings of US clients or suffer a 30 percent withholding tax on payments travelling out of the US.

The UAE joined 21 other countries which reached IGAs “in substance” earlier this month. Since then Australia has gone on to formally sign a Model I IGA.

Before these agreements, many non-US GPs reached a roadblock in their FATCA compliance action plans because it was unclear what type reporting agreement their local government would sign with the US.

But despite the additional FATCA agreements, some major private equity activity centers still have yet to sign FATCA papers with the US. G20 countries without a FATCA intergovernmental agreement are: Argentina, China, South Korea, Indonesia, Russia, Turkey and Saudi Arabia.

GPs and other foreign financial firms covered by the law must register with US tax authority the Internal Revenue Service ahead of the law’s July 1 go-live date.

For more on FATCA, including why many GPs are seeing the July deadline as only a half-way point in their FATCA compliance planning, be sure to check out the July edition of pfm.