United States (US) Foreign Account Tax Compliance Act (FATCA)
Saudi Arabia signed a Model 1 Intergovernmental Agreement (IGA) in light of the FATCA dated 24 June 2014. The draft regulations were issued in February 2012 and the final regulations were released on 17 January 2013 with an amendment to some of the deadlines issued through a notice on 12 July 2013.
On 6 February 2017, the Saudi Arabian Cabinet formally approved the IGA between Saudi Arabia and the United States to improve international tax compliance and implement the FATCA. The IGA and related implementing regulations will reduce the burden for financial institutions and remove some of the implementation issues faced by Saudi Arabia financial institutions, including the legal impediments related to data protection and reporting restrictions.
Under the IGA, Saudi-based financial institutions will be treated as compliant with the FATCA and should not be subject to a 30% WHT on US-source income and gross proceeds unless a financial institution fails to meet the requirements set out in the IGA and Saudi implementing regulations.
The IGA, signed on 15 November 2016, requires financial institutions to report US reportable accounts to the local competent authority, which is the GAZT. In case of non-compliance with IGA requirements, the GAZT may subject the relevant financial institutions to penalties.
Common Reporting Standard (CRS)
On 2 November 2016, the OECD announced that the Kingdom of Saudi Arabia joined the CRS Multilateral Competent Authority Agreement (MCAA), committed to the first exchange of financial account information by September 2018 (2018 adopter).
Applicable for individuals and legal entities, it aims to give participating countries transparency on the financial assets that residents hold offshore.
The CRS requires financial institutions to identify customer tax residencies and report to local tax authorities financial accounts held directly or indirectly by foreign tax residents. It also requires those tax authorities (in participating countries) to exchange this information.
If you are tax resident of a country other than the Kingdom of Saudi Arabia or where you maintain your bank account, then under the CRS, KSA-based financial institutions may be required to provide details, including information relating to accounts, to the tax authority in the country of your tax residency through the GAZT in the Kingdom of Saudi Arabia. In case of non-compliance, the GAZT may subject the relevant financial institutions to penalties.