FATCA and CRS in the Middle East
Understanding the requirements
Foreign Account Tax Compliance Act (FATCA) is a U.S. legislation which aims to combat tax evasion by U.S. persons. The intent behind the law is for Foreign Financial Institutions (FFIs), i.e. non-U.S. financial institutions to identify and report any U.S. persons that hold assets abroad to the Internal Revenue Service (IRS). As of today, a large majority of FFIs in the Middle East region are adhering to the FATCA requirements (either by entering into a FATCA agreement directly with the IRS or by complying with the local Intergovermental Agreement) due to the potential commercial, reputational and financial risks (e.g. withholding and regulatory penalties) of non-compliance.
Following on from FATCA, the Organization for Economic Cooperation and Development (OECD) has formed an initiative for global tax transparency known as the Common Reporting Standard (CRS). The CRS is a broad reporting regime that draws extensively on the intergovernmental approach to the implementation of FATCA. Similar to FATCA, the CRS requires all financial institutions resident in a participating jurisdiction to identify and report any reportable accounts (typically persons tax resident in a CRS participating jurisdiction). As of January 2017, over 100 jurisdictions have signed or committed to sign the CRS. This includes Bahrain, KSA, Kuwait, Lebanon, Qatar and the UAE in the late adopters group.
In this brochure, we highlight the CRS milestones, their implications on financial institutions in the Middle East in addition to key considerations with regards to CRS and FATCA and the Deloitte approach to equip businesses with the needed knowledge and tools to ensure compliance.