Kuwait’s Ministry of Finance has expressed its desire to sign a Model 1 Intergovernmental Agreement (IGA) to assist banks comply with the United States Foreign Account Tax Compliance Act (FATCA).
FATCA demands Foreign Financial Institutions (FFIs) in order to report to the US Internal Revenue Service (IRS) information on assets of USD50,000 or more held by US taxpayers, or perhaps by international entities during which US taxpayers hold substantial ownership interest. Failure of an FFI in order to publish details could result in a 30% withholding tax currently being levied on US source payments, and may result in the potential loss of correspondent banking relationships.
The Kuwaiti finance ministry explained that it has established a committee created from representatives of the ministry’s tax department, the Foreign Ministry, the Central Bank of Kuwait, and the Kuwait Banking Association to arrange for the signing of the agreement.
The committee has told financial institutions to disclose information on their American clients, and has informed them that they must register with the IRS before May 5, 2014. When an IGA is signed it will enable the process of transmitting data to US authorities through a centralized authority in Kuwait.
The finance ministry’s statement pointed out that 26 European countries have signed FATCA agreements with the US, and 19 other countries are in the final stages of negotiations.
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