Deloitte: New FATCA regulations are out, institutions must act fastDOWNLOAD
5 March 2012 – The latest Foreign Account Tax Compliance Act (FATCA) regulations have been issued, which will have major implications for non-US Financial Entities (FFIs) across the world, reports Deloitte Middle East. To support banks and other financial institutions in the region in managing their impact, a FATCA Seminar was hosted by Deloitte in Jordan on March 4, 2012, under the patronage of H.E. Marwan Awad, the Chairman of the Association of Banks in Jordan.
The FATCA Seminar was tailored to address the unique needs of Middle Eastern institutions, including Islamic banking and takaful insurance structures as well as sovereign wealth funds, and family offices. The seminar provided an open and collaborative forum in which Compliance, Legal, Technology, Finance, Tax and Marketing executives were able to share ideas, methodologies, techniques, and tools to meet the challenges presented by this new legislation.
"It will be imperative for competitiveness that Jordanian banks work collaboratively with the banking association and the central bank, to become FATCA compliant,” stated Asem Haddad, tax partner in Deloitte Amman.
"This is one of the most critical commercial issues currently faced by banks and financial institutions across the globe” said Ali Kazimi, Deloitte Middle East’s regional managing director for International Tax Services. “It is essential that financial institutions across the region fully understand the impact of FATCA in time for the fast approaching 1 January 2013 go live date. Non-compliance with FATCA can result in a 30 percent withholding tax, while compliant institutions are also likely to refuse to deal with a non-FATCA registered institution.”
Since its enactment, FATCA has generated significant controversy amongst financial institutions across the globe. However, despite repeated calls for its repeal, financial institutions everywhere have to accept the inevitable and adapt to the changes.
FATCA requires not only all foreign (non-US) banks but also other financial institutions (mutual and hedge funds, insurance companies, trusts and Islamic Finance structures) to disclose all US account holders to the IRS (Internal Revenue Service or the US tax authority). The operative mechanism is that if any affected entity wants to invest in the United States, it has no choice but to comply with FATCA, irrespective of whether it has a U.S. branch, office, or other presence.
The FATCA Seminar has been purposefully designed to address strategic issues faced by Middle East based financial institutions and explored the technical aspects of FATCA (including providing an update on the draft regulations) as well as the practical implications and potential solutions based on Deloitte’s experience around the globe. The compliance timeline was also shared with the attendees.
“Significant effort is required from financial institutions to meet the complex challenges of FATCA. This FATCA Tax Seminar, which is part of a series of events Deloitte will be hosting, provides a valuable opportunity for the Jordanian financial community to become aware of the challenges and prepare themselves in this critical year before FATCA comes into effect,” said Karim Nabulsi, managing partner of Deloitte in Jordan.
Deloitte Middle East has recently been awarded for the third in a row a Tier 1 Tax advisor status for the GCC region by the International Tax Review World Tax 2012 Ranking.