With the deadline of the Foreign Account Tax Compliance Act fast approaching, the UAE has committed to a deal to cooperate with the US in its fight against tax evasion.

With the deadline of the Foreign Account Tax Compliance Act fast approaching, the UAE has committed to a deal to cooperate with the US in its fight against tax evasion.

The US has reached an agreement in substance to include the UAE on its list of jurisdictions to be treated as having an intergovernmental agreement.

HE Obaid Humaid Al Tayer, minister of state for financial affairs, said that the deal will be implemented next month and that the Emirates will in effect be treated as having an IGA.

“Meetings and business workshops will be conducted on different committee levels during the coming months to finalise all required procedures in regards to signing the final draft of the agreement,” he said.

FATCA was enabled in 2010 as part of the US government’s plan to curtail offshore tax evasion by encouraging transparency through the collection of information on accounts held by US citizens abroad.

It is set to take effect on 1 July and requires all financial institutions outside of the US to regularly submit information on financial accounts held by US persons to the IRS. When the act comes into force, those who are not compliant will suffer a 30 per cent withholding tax on income and gross proceeds.

The UAE ministry of finance said the agreement was in line with the country’s commitment to support financial industry and strengthen its position as a global financial centre. It added that it would also reduce the burden of FATCA for banks and financial institutions operating throughout the emirates.

Model 1 IGA (issued in July 2012) highlights and benefits include: a relaxation of deadlines; simplified due diligence; and increased clarity around due diligence with country specific provisions, as stated on the Thomson Reuters website.