Lebanese banks help U.S. in fight against tax evasion

Mark Srere speaks during the FATCA conference in Beirut, Monday, June 9, 2014. (The Daily Star/Mohammad Azakir)

BEIRUT: Lebanese financial institutions are committed to full compliance with a U.S. anti-tax evasion law to become effective July 1, according to legal experts from both countries, who urged Lebanese citizens with dual citizenship to follow suit.

As of today, some 114 financial institutions operating in Lebanon have registered with the U.S. to comply with the Foreign Account Tax Compliance Act, according to the Internal Revenue Service website, and more are to follow, said Chahdan E. Jebeyli, head of the legal and compliance group at bank Audi, Lebanon’s largest lender.

Jebeyli was speaking at a seminar organized by the American Lebanese Chamber of Commerce at Phoenicia hotel in Beirut to highlight the requirement for the implementation of FATCA in Lebanon, the consequences of non-compliance and tax issues for U.S. persons living in Lebanon.

FATCA requires foreign financial institutions to report information about accounts held by either U.S. taxpayers or foreign entities in which U.S. taxpayers have a substantial ownership interest directly to the IRS. Those who do not comply are subjected to a 30 percent withholding tax on income from U.S. financial assets held by the banks, John Barrie, a tax controversy lawyer with international law firm Bryan Cave LLP, explained in his presentation.

With a highly dollarized economy and a national currency pegged to the U.S. dollar, Lebanon’s banking sector cannot afford to strain ties with the U.S., according to experts.

“Correspondent banking is very important to Lebanese banks ... since more than 75 percent of transactions are being carried in U.S. dollars,” Jebeyli said, highlighting the importance of complying with FATCA for Lebanese banks.

Lebanese banks have opted to report directly to the IRS and Lebanon has not signed an Intergovernmental Agreement with the U.S., although an IGA may be signed at a later stage, Jebyeli added.

According to estimates, there are close to 90,000 Lebanese with U.S. passports residing in Lebanon.

Lebanese banks will have to sift through all bank accounts with a threshold of over $50,000 for possible U.S. indicia including citizenship, residency and addresses. In case of U.S. citizenship or resident for tax purposes, banks must obtain a banking secrecy waiver and a withholding certificate.

If the customer fails to provide necessary documentation, he will be classified after 90 days as a “recalcitrant account” and thus will be subject to withholding or the closure of his account, Mark Srere, a criminal defense lawyer at Bryan Cave LLP law firm, said in his presentation.

While individual accounts of less than $50,000 are exempted from review, Jebeyli said the exemption was made for “the benefit of banks rather than taxpayers.”

Despite voicing strong commitment to comply with FATCA provisions, some bankers have complained of the high cost of implementing the law, arguing that the U.S. Treasury has outsourced anti-tax evasion enforcement to banks.

While FATCA is slated to go into effect next month, in May the IRS issued new guidance labeling 2014 and 2015 as a transition period for foreign banks that have shown “good faith efforts” in complying with FATCA provisions.

A version of this article appeared in the print edition of The Daily Star on June 10, 2014, on page 5.




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