US foreign tax act to affect Bahrain firms
Manama, December 15, 2011
The US Foreign Account Tax Compliance Act (Fatca) will affect almost all Financial Institutions and other entities in Bahrain with exposure to US tax payers and US transactions, said an expert.
Fatca legislation and its impact on the entities in Bahrain were discussed in a recently held breakfast seminar hosted by global audit, tax and advisory firm KPMG and attended by more than 55 delegates from 30 entities at the InterContinental Regency.
“The specific requirements for Fatca compliance remain largely unknown and, hence we acknowledge that businesses require more knowledge from international experts and, we hope to address the implications of the Fatca regulation through our seminar,” said KPMG managing partner Jamal Fakhro.
The goal of Fatca is to identify offshore account holders and penalize foreign financial institutions and entities that refuse to disclose the identities of certain US persons, he added.
Foreign financial institutions are to report certain information to the IRS about financial accounts held by US taxpayers or by foreign entities in which US taxpayers hold a substantial ownership interest.
To be Fatca compliant Foreign Financial Institutions (FFIs) and other entities have to sign an agreement with the US tax authorities (IRS) that they will identify all US tax payers in their customer base and report certain data to the IRS on a regular basis.
This agreement has to be prepared between July 1 and December 31, 2013 to be effective from January, 2014.
“All affected companies have to review their business model and products to understand how they will be affected. Since the Fatca rules generally impact all group companies the analysis has to be done on a group level,” said Eugen Straub, head of international tax, KPMG Middle East.
“It might sound that there is still plenty of time until these rules come into effect, but the required steps to analyze the impact may identify some fundamental changes to the way the entities in the region will operate,” he added.
This legislation was enacted to prevent offshore tax abuses by US persons. Impacted entities in the region will be required to adhere to complex customer identification and due diligence requirements and report information regarding account holders that are specified US persons or US owned entities.
Due to the complex nature of the rules and the fact that they are still evolving, many questions that will arise between now and the implementation date need to be answered by the entities in the region.
The conference covered several such considerations and, discussed how the businesses should prepare now. – TradeArabia News Service