The Union of Arab Banks (UAB) and the World Union of Arab Bankers (WUAB) organized Wednesday here a seminar on the impacts of the US adoption of the Foreign Account Tax Compliance Act (FATCA).
The Seminar, themed "Operational procedures for the application of the FATCA law and developments in international standards to combat money laundering", was attended by representatives from 14 Arab countries. In his opening speech, WUAB Chairman and President of the Union of Lebanese Banks Joseph Torbey stressed that the Arab countries have to get prepared for the application of FATCA avoid the penalties announced by the US Administration against violators.
He pointed out that act targets US citizens trying to evade paying tax to the US Internal Revenue Service (IRS). Refusing to comply with the act negatively impacts the Arab financial institutions which may also face punishment from the US government, he said.
The Foreign Account Tax Compliance Act (FATCA), enacted in 2010 as part of the Hiring Incentives to Restore Employment (HIRE) Act, is an important development in U.S. efforts to combat tax evasion by U.S. persons holding investments in offshore accounts.
Under FATCA, certain U.S. taxpayers holding financial assets outside the United States must report those assets to the IRS. In addition, FATCA will require foreign financial institutions to report directly to the IRS certain information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.
FATCA requires certain U.S. taxpayers holding foreign financial assets with an aggregate value exceeding 50,000 to report certain information about those assets on a new form (Form 8938) that must be attached to the taxpayer's annual tax return.
FATCA will also require foreign financial institutions ("FFIs") to report directly to the IRS certain information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.
To properly comply with these new reporting requirements, an FFI will have to enter into a special agreement with the IRS by June 30, 2013. Under this agreement a "participating" FFI will be obligated to: undertake certain identification and due diligence procedures with respect to its accountholders; report annually to the IRS on its accountholders who are U.S. persons or foreign entities with substantial U.S. ownership; and withhold and pay over to the IRS 30-percent of any payments of U.S. source income, as well as gross proceeds from the sale of securities that generate U.S. source income, made to (a) non-participating FFIs, (b) individual accountholders failing to provide sufficient information to determine whether or not they are a U.S. person, or (c) foreign entity accountholders failing to provide sufficient information about the identity of its substantial U.S. owners.