BEIRUT: Lebanese banks are stepping up coordination efforts ahead of sign-up instructions to be announced next week by the U.S. Treasury, industry officials told The Daily Star, one of the last steps toward full compliance with the American anti-tax evasion scheme. The Foreign Account Tax Compliance Act requires foreign financial institutions to disclose the balances, receipts and withdrawals for any American account holders to the U.S. Internal Revenue Service. Those who do not comply are subjected to a 30 percent withholding tax on income from U.S. financial assets held by the banks.
The IRS has yet to finalize sign-up instructions for a new online portal due to open by July 15.
Makram Sader, the secretary-general of the Association of Banks in Lebanon, told The Daily Star that banks had been in talks over details pertaining to the implementation of FATCA for a while, without giving further information.
Joe Sarrouh, advisor to the chairman of Fransabank, told The Daily Star that the ABL should play a leading role as local financial institutions confer about the sign-up instructions.
Though Lebanese banks would have to individually sign up with the IRS, Sarrouh said coordination among banks was required to guarantee uniformity in agreements between financial institutions and the U.S. Treasury.
“Banks have also to examine the sign-up instructions to make sure they don’t conflict with local banking laws,” Sarrouh added.
The original deadline for registration was supposed to have been July 31, but that was extended last October to give the banks more time to come into compliance with the regulations.
According to the U.S. Treasury, hundreds of thousands of banks, insurance companies and investment funds worldwide that serve American customers are required to register with the IRS, an arm of the U.S. Treasury, by Oct. 25 to avoid incurring FATCA penalties from Jan. 1, 2014 onward.
Some analysts fear that late advice from the IRS on the registration process could create a bottleneck later this year, leading to financial institutions being hit with penalties in 2014 through no fault of their own.
However, Sarrouh played down such fears, insisting that they were premature: “Let us first examine the sign-up instructions before raising any concerns over potential hurdles.
“Even if it is the case, any obstacles would affect the whole system and be dealt with globally rather than on a local level,” he said.
“I believe the ultimate goal of U.S. authorities is to clamp down on tax evasion by American citizens.”
According to Sarrouh, Lebanese banks are technically in a very advanced stage in terms of collecting and sorting the required information on U.S. customers.
Sarrouh added that though the number of such people was relatively not that large, it required tremendous efforts and relatively high costs to collect the needed data.
According to some estimates, there are close to 90,000 Lebanese with U.S. passports residing in Lebanon.
U.S. law requires that Americans pay taxes on their foreign income, as well as their domestic income.
In an effort to address some foreign concerns, the U.S. is negotiating with some 80 governments to allow firms to report U.S. client information via their local tax authorities rather than directly to the IRS.
So far, deals have been made with nine countries to create intergovernmental agreements.