The Foreign Account Tax Compliance Act (FATCA), enacted under U.S. law in 2010, is aimed at combating tax evasion by U.S. persons holding investments in offshore accounts and to enforce tax compliance by US persons holding banking and financial assets and accounts outside the USA.

All Foreign Financial Institution (FFI’s) are required to identify and report U.S. accountholders (both individuals and owners of foreign entities) to the Internal Revenue Service’s (IRS) through Ministry of Finance, Kuwait.

Intergovernmental agreements (IGAs) have been signed or agreed by the US with more than 100 partnering jurisdictions in order to roll out FATCA to the domestic legislation of such jurisdictions. FATCA and IGA are effective as of April 2015.

• Under FATCA and IGAs the Foreign (non-US) Financial Institutions (FFI) are required to identify amongst its financial account holders in a due diligence procedure those account holders who are US persons. Then on annual basis these FFI are required to report certain personal and financial information of those US reportable accounts to the AEOI FATCA Portal of the Ministry of Finance, who will subsequently automatically exchange such information with the IRS.
• All other entities worldwide are either Active or Passive Non-Financial Entities. Individuals and the NFE’s have to disclose its FATCA status to the Financial Institutions and other FFIs where they hold accounts, whereby the Passive NFE also have to disclose any substantial US owners or US Controlling Persons.

Reportable accounts identified in the process of Due Diligence have to be reported in the annual FATCA and IGA reporting to the AEOI FATCA portal of the Ministry of Finance.

• Reporting is required in XML reports that allows automatic processing. This information will be forwarded to IRS.
• Such information per Reportable Account consists of personal data (name, address, data/place of birth, tax residency, TIN) plus financial data: account value, gross income (dividend, interest, distributions) and gross proceeds.

Financial Institutions subject to FATCA in Kuwait are required, under the Ministerial Resolution, to appoint an accredited audit firm that is not their external auditor to carry out the required review procedures.

The audit firm is required to carry out the required review procedures and issue the following reports:

• Report on FATCA FFI Classification
• Report on FATCA Reporting Procedures.
• Report on FATCA Compliance Certification for financial institutions about the extent of compliance with FATCA requirements and integrity of processes and procedures in place.

The above reports have to be submitted by the financial institution to the Ministry of Finance on or before 30 August of each year with respect to the previous year’s FATCA reporting.