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Alternative Market Briefing

FATCA impacts Saudi investment managers

Friday, November 22, 2013

Beverly Chandler, Opalesque London:

Jad Fares of Advent Software warns that FATCA, the US law designed to prevent US tax-payers from avoiding tax and concealing their assets from the United States Internal Revenue Service (IRS) is set to have a significant impact on investment managers in the Kingdom of Saudi Arabia. "Despite the belief that they are exempt from FATCA, many Saudi-based managers are at risk of being affected" he writes.

FATCA requires that foreign financial institutions register with the IRS by June 2014 and if they do not register, they will then be regarded as "non-participating". This means that a 30% withholding tax will be applied to all their income on American assets from 2014 as well as to the proceeds from the sales of these assets from 2015.

Fares says that Saudi managers have the option to refuse to take on US clients or sell off their US clients thereby avoiding FATCA compliance. But, he asks, will managers pay the price for loss of business?

"Both registration and compliance are arduous. Many fund management companies will require 18 months or longer in order to become FATCA-compliant. They need to learn about FATCA tax law and to monitor communications from the US Department of the Treasury to develop processes in order to better understand their US clients. Extensive evaluation of their current systems and processes in areas such as corporate actions, tax operations and account s......................

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