- The new Intergovernmental Agreement between UAE and the United States under the US Foreign Account Tax Compliance Act (FATCA)
- UAE’s participation in the tax transparency forum of the Organisation for Economic Co-operation and Development
- An increase in property transfer fees to 4 percent.
We explore these developments and their implications for investors below. Investors in UAE and other GCC countries will also be affected by the new GCC-Singapore free trade agreement.
The US and UAE governments are in the process of signing the FATCA Intergovernmental Agreement (IGA) Model 1. Under this agreement, banks and financial institutions in the UAE will be required to annually compile data for submission to the UAE regulatory authorities. The UAE Ministry of Finance would then send this data to the US Internal Revenue Service.
According to a notice1 from the UAE Central Bank, banks and other financial institutions in the UAE must complete the following actions to facilitate the signing of the IGA:
- Identify customer accounts that are a “US Reportable Account”, which is defined as a financial account maintained by a reporting UAE financial institution and held by one or more specified US persons or by a non-U.S. entity with one or more controlling persons that is a specified U.S. person (implementation date: 19 November 2013).
- Adopt FATCA’s due diligence procedures for identifying and reporting on US Reportable Accounts and for payments to certain nonparticipating financial institutions (implementation date: 1 January 2014).
- Prepare relevant systems for establishing electronic connection to the Central Bank’s FATCA Reporting System, currently in development. All banks and other financial institutions should expect to be contacted for this purpose during the first quarter of 2014 (implementation date: 1 March 2014).
- Be prepared to register via the IRS portal to obtain a “Global Intermediary Identification Number” (final registration date: 1 November 2014).
- Adopt reporting procedures specified in the IGA (first report for 2014 must be sent to the Central Bank by 1 August 2015).
The Central Bank, with help from a US law firm, will provide legal support and conduct workshops to assist banks and other financial institutions in implementing the FATCA requirements.
As part of the OECD’s project to strengthen transparency and boost the comprehensive exchange of information between governments worldwide, members of the “Global Forum on Transparency and Exchange of Information for Tax Purposes” met in Jakarta, Indonesia in November 2013 to discuss steps toward greater international cooperation against tax evasion. The UAE was among the meeting’s participants.
The Global Forum released compliance ratings for more than 50 countries and jurisdictions, assessing the quality of their legal and regulatory framework and implementation of global tax standards. Countries are rated on a scale ranging from “compliant” to “largely” or “partially” compliant to “non-compliant” in terms of their availability of information, access to information and exchange of information. Countries were also given an overall rating.
Based on the progress report from OECD, some jurisdictions including the UAE could not receive compliance ratings, pending further improvements to their legal and regulatory frameworks for exchange of information in tax matters. A supplementary report outlining the UAE’s progress in implementing the international standard has been published.
The government of Dubai has increased property transfer fees to 4 percent (from 2 percent charged earlier).2 The fee is to be collected from both the seller and the buyer equally, unless otherwise agreed by the parties.
1Notice number 321/2013, dated 19 November 2013.
2Executive Council Resolution No. 30 of 2013 (PDF 375 KB), dated September 2013, approving the fees concerning The Land Department.