The US Department of Treasury opened a branch in Cairo to familiarise US expatriates, Green Card holders, or US citizens of Arab origins with the Foreign Tax Compliance Act (FATCA).
The branch was opened to inform those who have any outstanding tax payments, which have been discounted due to decisions taken by the US government, General Manager of the Emirates office Ahmad Mohamad Abu Nar said.
The Cairo branch is one of three representative offices that recently opened in the Arab region, with the other two in Jeddah and Riyadh.
Negotiations were held in the main office in New York regarding opening the three offices within one year. The offices aim to equip US citizens and Green Card holders who reside in the Arab region with awareness of the FATCA to ensure that each individual is aware of their legal obligations, financial, and criminal penalties with regards to any outstanding unpaid taxes.
In 2010 the US Congress voted to enforce the FATCA, which aims to grant wider powers to specific authorities outside the US and to gain financial details regarding individuals carrying US passports.
A substantial number of Egyptian banks became signatories to an accord, which compelled them to apply the FATCA. Indeed, a number of banks commenced sending data regarding their clients with US citizenship and Green Card holders to the American Internal Revenue Service.
According to Abu Nar, it has come to their attention recently that a large number of Arabs have been relinquishing their US citizenship due to fears of financial and criminal penalties that await them in case they do not adhere to any outstanding tax payments they have not met.
For Arabs who are contemplating giving up their US citizenship, Abu Nar said they should contact US taxation specialists since the issue could lead to various taxation consequences encompassing previous years. A 30% exit tax applies if their wealth exceeds $2m, or their annual income during the last five years before relinquishing their citizenship exceeds a certain limit. They would also have to provide an income tax for the next three to five years from the date they have relinquished their US citizenship.
Abu Nar said it is necessary to separate between providing a personal income tax return outlining annual income and providing a personal bank statement outlining bank accounts and transactions outside the US. In the case of intentionally withholding such information, this could lead to financial penalties up to $100,000, or 50% of the undisclosed assets, whichever is larger, annually.
