On 24 June 2014, the governments of Saudi Arabia and the United States signed an agreement to improve international tax compliance and to implement the US Foreign Accounts Tax Compliance Act (FATCA). The agreement is still in draft stage but is expected to be signed and be enforced in the near future. Once the agreement is signed, Saudi Arabia joins Kuwait, Qatar and other countries in the Gulf region and worldwide in implementing the US foreign tax disclosure law.
Under the agreement, it is expected that financial institutions in Saudi Arabia will be required to report certain information about financial accounts held by US taxpayers or by foreign entities in which US taxpayers hold a substantial ownership interest. KPMG in Saudi Arabia understands that the initial proposed date for the first reporting by Saudi banks would be 30 September 2015. However, this date may change depending on when the agreement is signed.
KPMG in Saudi Arabia also understands that the Department of Zakat & Income Tax (DZIT) may be designated as the FATCA Reporting Partner in charge of collating the information from the financial institutions and submitting it to the US government on a consolidated basis.
FATCA is expected to affect over 200,000 Saudis with US citizenship1.Under US tax law, US citizens and green card holders are required to file US income tax returns, report their worldwide income, even if not physically present or resident in the U.S, and disclose to the IRS information about their foreign bank accounts and certain foreign investments. The FATCA requirements directly affect Saudi individuals who were born in the US or hold a American passport or green card, such that they may have to comply with US tax filing and reporting requirements.
US citizens who have never filed US tax returns may take advantage of the IRS’ “streamlined compliance procedures”, an amnesty program that allows US citizens to voluntarily come into compliance with their US tax filing requirements without incurring severe penalties.
US citizens who never obtained a social security number and plan to file their US tax filings are advised to apply for one immediately to avoid delays in processing their tax returns.
1 “200,000 Saudi’s affected by new US tax law”, Saudi Gazette, 27 October 2014.