Ministry Directs Banks to Report Violators of International Tax Agreements

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Possibility of amending FATCA models suggested

KUWAIT CITY, June 24: According to informed sources, the Ministry of Finance has notified banks that they must inform the Central Bank of Kuwait, the Capital Markets Authority (CMA) and the Insurance Regulatory Unit about their clients who are not cooperating in applying international agreements related to the exchange of information for tax purposes. Appropriate legal measures will be taken by the supervisory authorities against the financial institutions concerned with the implementation of these agreements, reports Al-Rai daily.

The Ministry of Finance’s statement in this regard was part of a broader response provided by the ministry to a set of banking inquiries related to the obstacles facing local banks in implementing tax information exchange agreements, specifically the American Tax Compliance Agreement FATCA and the agreement for the automatic exchange of account information tax “joint reporting standard” Banks sought to clarify the appropriate action that they should take in the event that there are obligations on their customers in terms of loans or credit facilities.

Discussion
It seems that the open discussion between the Ministry of Finance and the banks in this regard was more comprehensive. It was related to searching with the ministry for several answers to more than one question, and the difficulty facing the banks in implementing the two agreements. In addition to the above, the most prominent point of discussion perhaps is the banks’ request to determine how a bank should deal with companies that provide electronic payment wallets “digital wallet”) and whether these entities are subject to tax information exchange agreements.

The banks also asked whether the companies that provide services other than broker services or the issuance of money, which is the electronic wallet service where customers’ deposits are accepted in this wallet, are entities within the scope of the exempted companies Furthermore, the Ministry of Finance stated that the electronic wallet, based on the procedures and tools for electronic payment of funds, must be included in the definition of the financial institution subject to reporting of the FATCA and Joint Reporting Standard agreements. Meanwhile, banking inquiries included a question about the position of individual institutions in Kuwait, highlighting that these entities in Kuwait conform with the international legal and accounting concept of “sole proprietorship” companies. It is in accordance with the instructions for the FATCA forms published by the US Revenue Service and the guideline for the certification form.

Both self-published by the Organization for Economic Co-operation and Development refer to sole proprietorships being treated as individuals rather than corporations. In response, the Ministry of Finance clarified that the legal standards for the activities of individual institutions subject to the FATCA and Joint Reporting Standard tax agreements are being studied and defined. The sources said the banks expressed their desire to the Ministry of Finance to review the draft law for the automatic exchange of tax information in its final form prior to its approval by the competent authorities in accordance with the constitutional procedures, in order to express opinions and observations on what was stated in the draft law, in relation to the application, fines or evidence.

However, the Ministry of Finance stated that the draft law was sent to the relevant legislative authorities after seeking the opinions of the legal authorities. Nonetheless, the sources explained that the discussions between the Ministry of Finance and the banks included talking about the possibility of amending the FATCA models. The banks suggested that the ministry merge the forms related to ministerial resolution No. 48/2015 regarding the guiding instructions for the implementation of the international FATCA agreement with the “Know Your Customer” model or any other forms to facilitate the process of collecting information for banks instead of being restricted to using the forms mentioned in the ministerial decision

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