Some banks turn away US citizens for failing to comply the US tax laws

Dubai: Some banks in the UAE are considering closing accounts or turning away American expats if they fail to provide certain information to comply with US tax laws or, in other cases, for no specific reason.

In a letter sent in May to their customers who are US passport holders, US green card and account holders born in the United States, a local bank requested an updated passport copy and IRS Tax Account Number stating that “this information is required for complying with the US Foreign Account Tax Compliance Act (‘Fatca’) 2010”.

“If … you do not update your records with the bank by June 30, 2013, we may be constrained to close your account with the bank,” it reads.

Gulf News approached several local and multinational banks on their stance towards their American clients but except HSBC, the rest declined to comment.

Fatca comes into effect from January 1 next year.

“Well in advance of the regulations becoming effective we will start to correspond with affected customers to help them understand how the regulations impact them, and make them aware of any actions they may need to take,” said Farah Farooq, an HSBC UAE spokesperson, in am email to Gulf News.

Transactions

But HSBC might follow in the coming months of closing accounts of its customers who decline to provide necessary details to banks in compliance with the US law.

“We may be required to stop doing business with customers who refuse to give the necessary information or consent, in accordance with the relevant Fatca regulations,” Farooq said.

The HSBC “is committed to becoming fully Fatca compliant in all countries in which we operate by the Foreign Financial Institution (FFI) Agreement effective date of 1 January 2014.”

Compliant Fatca FFI status allows intermediaries such as HSBC to not be subject to a 30 per cent withholding tax on their customers’ US source receipts effective January 1, 2014, by reporting to the IRS specified US persons’ information, such as account balances and transactions.

“As part of HSBC’s ongoing customer relationship, we may require customers to provide additional information relating to their status, to provide their consent to the provision of information and, where necessary, to allow us to withhold amounts to meet our Fatca obligations,” Farooq said.

In the past four years, the Obama administration has come hard on US citizens, with the IRS (Internal Revenue Service) tracking them down and prosecuting those who evade taxes by hiding money and other financial assets in foreign bank accounts.

According to the IRS, “If you are a US citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude from income up to an amount of your foreign earnings that is now adjusted for inflation ($91,400 for 2009, $91,500 for 2010, $92,900 for 2011, $95,100 for 2012). In addition, you can exclude or deduct certain foreign housing amounts.”

One UAE bank declined to comment on a case of denying its zero per cent balance transfer credit card to an applicant, an American expatriate residing in Abu Dhabi.

A local bank denied the credit card to Mustafa Jama even after he furnished necessary information to the bank, such as bank statements and scanned copies of six bank cheques he had given to his landlord as rent.

Jama, who works in the government sector and belongs to the higher income bracket, does not hold an account with with the bank. According to Jama, the bank manager told him that there was a bank circular saying that some nationalities, including Americans and British, were on a list that said that they were not to be offered that “particular credit card.”

Jama banks with two other local banks holding ‘elite’ and ‘privileged’ status respectively.