Law Number (4) of 2018 Ratifying the Agreement between the Government of the Kingdom of Bahrain and the United States of America (USA) to Improve International Tax Compliance and to Implement FATCA, and its Annexes I and II.

Overview

It is an Agreement concerning the improvement of International Tax Compliance and implementing Foreign Account Tax Compliance Act (FATCA). It has its basis on internal reporting, and automatic exchange, subject to the confidentiality and other protections, including the clauses limiting the usage of the information exchanged was between the Government of the United States of America (the USA) and the Government of the Kingdom of Bahrain (Bahrain).

What the Agreement Entails?

The agreement consists of 12 Articles

  • As per Article 12 (1), it shall come into force on the date of written notification from Bahrain to the US that all internal processes have been completed to ensure that all standards and specifications are met to entail the procedure.
  • Article 2 states that Bahrain shall be responsible for obtaining information from all reportable financial institutions on the name, address and US TIN of each US account holder. It will also apply to Depository accounts and Custodial accounts.
  • As per the Article 3 of the Agreement, the information obtained is to be exchanged automatically on an annual basis, and the amounts may be definite by the principles of the tax laws of Bahrain. Further to this, the currency in which the information is delivered should be identified. This Article also discusses the time and manner in which the data is to be collected and shared.
  • Regarding the general collaboration, if the Competent Authority of either party wishes to set forth or alter any terms, Article 5 (1) states that a follow-up request may be made by the US competent Authority, under which the Bahrain Authority shall provide additional information relating to a US reportable account.
  • Article 5 (2) states that if the US Competent Authority believe any minor or administrative errors have occurred, they shall notify the relevant authority in Bahrain. To ratify it, Bahrain shall apply its domestic laws to fix the issue.
  • In the case of non-compliance on the part of any Bahrain financial institution, Bahrain shall amend the error by way of their domestic laws as per Article 5 (3).
  • Under Article 7 of the agreement asserts that Bahrain shall be granted the benefit of more favorable terms as under Article 4 of Annex I of this agreement. Should more favorable conditions arise, the US should notify Bahrain, and under Article 7 (2), these terms shall automatically be applied as long as they have been specified before the signing of the agreement and were agreed upon during the time of signing.
  • Article 8 states that if doubts or difficulties arise in this agreement, the parties should look to reach mutual agreements as to how the matters can be resolved.
  • Article 9 concerns the confidentiality between the parties over this agreement and the information obtained as a result of it.
  • As per Article 12 (4), Article 9 will sustain any termination of this contract. This agreement may be amended if both parties mutually agree to the amendment. Article 12 also states that if either party wishes to make any changes to this agreement before December 31, 2018, they may consult in good faith to amend and reflect progress on commitments outlined in Article 6 of this agreement.
  • It gives the flexibility to either of the parties to terminate this Agreement by providing a written notice mentioning termination to the other party. The separation shall become effective on every first day of the month following the expiry of the 12months post the date of the termination notice.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.