UAE in initial accord with US to fight tax evasion
UAE Minister of State for Financial Affairs Obaid Humaid al-Tayer - AFP

ABU DHABI: The UAE finance ministry said Tuesday it has reached an agreement in principle with the United States to cooperate with Washington in its fight against tax evasion.

Starting from July 1, the U.S. Foreign Account Tax Compliance Act (FATCA) will be implemented, and institutions in nearly 70 countries will work under its rules.

The law demands that the foreign banks, investment houses and others provide information to U.S. authorities on accounts held by U.S. citizens and firms.

If they do not do so, the U.S. Treasury says it could institute a 30 percent withholding tax on payments made from the United States to the financial institution, essentially a stiff tax on their U.S. business.

UAE Minister of State for Financial Affairs Obaid Humaid al-Tayer said that, under this agreement, the UAE will be treated as having in effect an intergovernmental agreement on FATCA.

“Meetings and business workshops will be conducted at different committee levels during the coming months to finalize all required procedures in regards to signing the final draft of the agreement,” he added in a statement.

U.S. officials said this month that more than 77,000 banks and other financial institutions worldwide have joined its fight against tax evasion.

Looking for ways to close its budget deficit and clamp down on tax avoidance, Washington has particularly aimed the FATCA effort at traditional tax havens like Switzerland.

On May 19, Credit Suisse was fined $2.6 billion for actively helping Americans hide money to avoid taxes over many years.

U.S. Treasury Secretary Jacob Lew is expected in the UAE June 16 on a three-day trip that will also take him to Saudi Arabia, Israel, and Germany.

During his visit, Lew will discuss “the state of the global economy, as well as regional economic issues,” a Treasury statement said.

His meetings “will also focus on other issues of common interest, including continued cooperation on efforts to disrupt the financial and support networks of terrorist organizations.”

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