Middle East: The impact of FATCA on financial institutions in the GCC

International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Middle East: The impact of FATCA on financial institutions in the GCC

AdobeStock_178203234_impact

With the US Foreign Account Tax Compliance Act (FATCA) reporting deadlines approaching, foreign financial institutions (FFIs) should ensure they understand the impact of FATCA in their organisation and the compliance requirements they are subject to under the intergovernmental agreement (IGA), signed or agreed in substance, between the US and several countries in the GCC including: the Kingdom of Saudi Arabia (KSA), United Arab Emirates, Kuwait, Qatar, and Bahrain.

dawson.jpg

torres.jpg

Claire Dawson


Diana Torres

FATCA is a US regulatory requirement that seeks to prevent US taxpayers who hold financial assets in non-US financial institutions (foreign financial institutions or FFIs) and other offshore vehicles from avoiding their US tax obligations. The intention is for FFIs to identify and report to the IRS, any US persons holding assets abroad and for certain non-financial foreign entities (NFFEs) to identify their substantial US owners.

Failure to enter into an agreement or provide required documentation may result in the imposition of a 30% withholding tax on certain payments made to such customers and counterparties.

As the aforementioned countries have agreed in substance, or signed, a Model 1 IGA with the US Government, every entity that meets the FATCA FFI definition, not otherwise exempt under the IGA, will have to comply with the requirements established by the IGA including:

  • Register with the IRS and obtain a Global Intermediary Identification Number (GIIN);

  • Classify their financial accounts for FATCA purposes; and

  • Report US accounts identified (US accounts are financial accounts held by US taxpayers, or held by foreign entities in which US taxpayers hold a substantial ownership interest)

Financial institutions in these jurisdictions must make sure they meet the reporting deadline set out by the local regulator. Participating FFIs will be required to file information with respect to the 2014 calendar year (that is, for individual financial accounts on boarded after July 1 2014) before September 30 2015 (please note that this is the deadline for the local regulator to report to the IRS; the FFI's deadline is likely to be earlier and will be announced by the local regulator in due course).

The main challenge faced by FFIs in these jurisdictions has been the limited guidance provided by local regulators, particularly with respect to reporting; in certain instances no dates have been provided, nor a portal made available to the FFIs. Some regulators have indicated that a portal will only be made available once the IGA has been signed, which could potentially give FFIs limited time to report. FFIs should ensure they have the reporting data available in extractable format so they are able to meet the reporting deadline once it is announced.

Financial institutions should also be looking to future reporting requirements, namely the OECD's Common Reporting Standard (CRS). The CRS requires the reporting of assets held in one country by residents, nationals or taxpayers of another jurisdiction. More than 90 different countries have now committed to comply with this standard, including KSA, Qatar and the UAE with effect from 2018.

Claire Dawson (cdawson@deloitte.com) and Diana Torres (ditorres@deloitte.com)

Deloitte

Tel: +971 (0) 4506 4900 and +971 (0) 4506 4893

Website: www.deloitte.com/middleeast

more across site & shared bottom lb ros

More from across our site

Germany has forgotten to think about digital reporting requirements, a WTS partner claimed at ITR’s Indirect Tax Forum 2025
E-invoicing is currently characterised by dynamism, with fragmentation acting as a key catalyst for increasing interoperability, says Aida Cavalera of the International Observatory on eInvoicing
Pillar two and the US tax system ‘could work in harmony’, Scott Levine tells ITR in an exclusive interview to mark his arrival at Baker McKenzie
Peter White, who has a tax debt of A$2 million, has been banned for five years from seeking registration with Australia’s Tax Practitioners Board (TPB)
Wopke Hoekstra’s comments followed US measures aimed against ‘unfair foreign taxes’; in other news, Grant Thornton and Holland & Knight made key tax partner hires
An Administrative Review Tribunal ruling last month in Australia v Alcoa represents a 'concerning trend' for the tax authority, one expert tells ITR
A recent decision underlines that Indian courts are more willing to look beyond just legal compliance and examine whether foreign investment structures have real business substance
Following his Liberal Party’s election victory, one source expects Mark Carney to follow the international consensus on pillar two, as experts assess the new administration
A German economics professor was reportedly ‘irritated’ by how the Finnish ministry of finance used his data
Countries that care about the fair taxation of tech multinationals and equitable global distribution of wealth should back the UN’s tax framework, writes economist Abdelmalek Riad
Gift this article