Two years ago, the US passed the Foreign Account Tax Compliance Act (FATCA) that requires foreign banks and financial institutions to disclose the nationality of their account-holders or investors, allowing the Internal Revenue Service (IRS), the US government agency responsible for tax collection and tax law enforcement to uncover US citizens who are not registered with the IRS and avoiding tax payments.

The Act will be implemented in January 2013 and any banks or institutions that do not comply will face a 30% withholding tax on US source income, including dividends and interest paid on US securities, gross proceeds from the sale of US securities and substitute dividends.

For UAE banks, the disclosure and reporting process means incurring a cost of millions of dirhams or bearing a 30% withholding tax, according to tax experts.

For full story see: US tax act to impact banks in UAE