FATCA Tax Assurance

FATCA Tax Assurance

One of the main streams of income to any government is tax. However, countries discovered that some business entities, as well as individuals, are accommodating their investments in tax evasion to avoid tax reporting and obligation transparently.

As a reaction, countries supported the Automatic Exchange of Information (AEOI) between tax authorities to combat tax evasion for cross-border business and to enforce policies regarding ethical tax practices. Accordingly, G20 has developed an initiative to issue standards related to AEOI.

On 18 March 2010, the United States of America approved The Foreign Account Tax Compliance Act (FATCA), i.e. a federal law that was enacted as part of the US Hiring Incentives to Restore Employment (HIRE) Act.

Accordingly, governments signed intergovernmental agreements with the US government regarding the implementation of FATCA.

What is FATCA?

The Foreign Account Tax Compliance Act (FATCA) is a 2010 United States federal law requiring all non-US (‘foreign’) financial institutions (FFIs) to search their records for customers with indicia and to report the assets and identities of such persons to the US Department of the Treasury.

What is the relationship between FATCA & the Government of Kuwait?

The State of Kuwait represented by the Ministry of Finance signed the Foreign Account Tax Compliance Act (FATCA) agreement on April 29, 2015, with the Government of the United States of America represented by the Internal Revenue Service (IRS) to improve international Tax Compliance and to Implement FATCA.

What are the entities required to comply with FATCA in the State of Kuwait?

Pursuant to the Ministerial Resolution No. 48 of 2015 concerning the preliminary guidelines for implementing FATCA requirements in the State of Kuwait,

all financial institutions operating in the State of Kuwait shall use due diligence by reviewing and identifying the financial accounts belonging to US persons and then communicate the information relating to such accounts to Kuwait’s competent authority, which in turn will transfer the information to US Internal Revenue Service (IRS). As per the aforesaid Ministerial Resolution, all financial institutions operating in Kuwait shall comply with reporting requirements in accordance with FATCA Agreement and meet the Agreement requirements by taking a set of actions as detailed in the above-mentioned Ministerial Resolution, within the prescribed time frame.

What are the risks that financial institutions may face due to non-compliance with FATCA requirements?

The competent authority of each corresponding country has the right to apply to withhold 30% on certain payments to FFI if those FFI are not committed to the agreement.

Moreover, the financial institution in Kuwait may be subject to local penalties by national authorities such as but not limited to the Kuwait Ministry of Finance, Central Bank of Kuwait, and Capital Markets Authority.

What are the services offered by Baker Tilly Kuwait related to FATCA Tax Compliance?

  1. FATCA Assurance Services

    As Baker Tilly in Kuwait has two licensed auditors who are registered in the Ministry of Finance as tax auditors, we offer FATCA assurance services, which cover the following:

    • FATCA FFI Classification Attestation.
    • FATCA Reporting Procedures Attestation.
    • Issuance of Annual/ On-Demand Compliance Certification for financial institutions about the extent of compliance with FATCA requirements and integrity of processes and procedures in place.
  2. FATCA Consulting Services

    • Develop FATCA Process, Policies, and Procedures Manual.
    • Troubleshooting issues related to FATCA reporting.

What is the added value of using Baker Tilly Kuwait services regarding FATCA?

  • Ensure compliance with the applicable legislative and regulatory requirements related to FATCA in the State of Kuwait.
  • Minimize the risk of balances withheld in the corresponding countries that are under the umbrella of FATCA agreements.
  • Support cross-border business transactions.
  • Minimize risks of exposure to financial penalties and sanctions, and thus, save relevant expenses and costs.
  • Enhance business entity’s reputation and motivate business growth.

What is the competitive edge of Baker Tilly Kuwait in providing these services?

Baker Tilly is distinguished by specialist professional experience and offers the following characteristics carrying added value to our clients as follows:

  • Approved licensed auditors in the Kuwait Ministry of Finance
  • A global consulting firm operating in the State of Kuwait.
  • Bilingual team.