The Governor of Qatar Central Bank, H E Sheikh Abdullah bin Saoud Al Thani, addressing the forum on ‘Impact of the US Law on the Region’ yesterday.
BY Mobin Pandit
DOHA: Qatar faces a huge dilemma over complying with a new US law that asks countries across the world to report financial assets of American companies, citizens and green card holders for taxation purposes.
The legislation reportedly also requires countries to deduct taxes on the income of US companies, nationals as well as residents that exceed a certain threshold and report directly to the Internal Revenue Service (IRS) of the US.
The question of compliance poses a number of key challenges and risks to Qatar and other GCC states and they have begun actively coordinating among themselves to be better equipped to conform.
The Foreign Account Tax Compliance Act (FATCA), in a nutshell, aims at improving tax compliance and brings within its ambit those US companies and individuals as well as residents who have financial accounts or assets in foreign financial institutions.
The law requires that foreign institutional investors and other financial intermediaries prevent tax evasion by US entities, citizens and green card holders through use of offshore accounts.
All US-sourced payments, including dividends and interest paid by US corporations, are to be subject to 30 percent withholding tax. The tax also applies to gross sale proceeds from the sale of relevant US properties.
“The legislation aims to ensure more revenue for the US which would help it narrow its yawning budget deficit,” said Muftah Jassem Al Muftah, Director of Public Revenue and Taxation at Qatar’s Ministry of Economy and Finance.
He was addressing a forum here yesterday that was opened by the Governor of the banking regulator, Qatar Central Bank (QCB), H E Sheikh Abdullah bin Saoud Al Thani, on the ‘Impact of the US Law on the Region’.
A number of senior government officials from Qatar and other GCC states, top bankers, taxation experts and senior representatives from financial services providers, insurance industry professionals and asset managers attended the symposium. Some 200 people converged at the event.
The symposium was held by the QCB in collaboration with the Qatar Financial Markets Authority (QFMA), regulator of the Qatari bourse, and Qatar Financial Centre Regulatory Authority (QFRCA).
Since the US tax law has been announced it has led to many questions and fears in countries across the world and the GCC states are no exception, Al Muftah said. “The IRS has issued a number of legal notes clarifying how the legislation is going to be enforced and how it can be complied with,” said Al Muftah.
The aim of the law is to reach out to those US companies, citizens and residents who are not paying taxes. “This will ensure more revenue for Washington.”
However, to comply, Qatar and other GCC states face a number of challenges and risks, both legal and financial. “Should we breach our own laws that prevent revealing bank details of customers and exchanging these with others? And what legal authority do we have to deduct taxes on the income of customers for the benefit of other governments? These are the key questions for us to ponder over,” said Al Muftah.
Complying with the US law requires the taxation authorities of Qatar and other GCC states to be structurally modified and additionally have more finances and human resource.
“This is the biggest challenge facing us. And one must remember that our countries do not have much experience and expertise in taxation.” Al Muftah added: “We are still at a stage where we are creating capacities”.
Complying with this law requires the GCC states to make extensive preparations, which actually begins with these countries needing to deeply understand the requirements and the ways to comply, Qatar News Agency (QNA) reported.
“This symposium gives an opportunity to address this issue and answer questions and suggest the options we have to comply,” said Al Muftah.