Dubai: Many people, including American citizens working in the Gulf state, received recently letters from their UAE-based banks asking them for more details and papers in compliance with American laws introduced by tax service.

The move comes as many citizens of the Gulf States are checking whether they need to pay taxes to the US or not.

“As a result of new (US) legislative requirement, we are writing to you to request for additional documentation,” wrote HSBC bank in a letter sent to many of its customers earlier this month.

The bank is like other banks that agreed with the US government to comply with Foreign Account Tax Compliance Act (FATCA), a law introduced by US Department of Treasury and Internal Revenue Service (IRS), the letter stipulated.

“Providing these documents will allow us to establish your exact classification under FATCA. We will then classify you as either a US or a Non-US person based on the documents you provide us,” the letter added.

Commenting to Gulf News on the letter, an HSBC spokesperson said: “HSBC has become FATCA compliant in all countries in which we operate by the effective date of the Foreign Financial Institution (FFI) Agreement date of 1 July 2014,”

“Compliant FATCA Foreign Financial Institution (FFI) status means that financial institutions such as HSBC will not be subject to a 30% withholding tax on US source receipts (effective 1 July 2014), by reporting to the IRS specified US persons’ information (e.g. account balances and transactions), via the participating FATCA partner country or directly (as applicable). As part of HSBC’s ongoing customer relationship, we may require customers and clients to provide additional information relating to their status and provide their consent to the provision of information, in accordance with the relevant FATCA regulations,” the spokesperson added in a statement.

“International banks have no choice. Compiling with FATCA is compulsory,” said one banker privately because he is not allowed to talk to press. “Our headquarters and regulators compel us to implement the policy,” he added.

FATCA, or Foreign Account Tax Compliance Act, was enacted in 2010 by Congress to target non-compliance by US taxpayers using foreign accounts.

“FATCA requires foreign financial institutions (FFIs) to report to the IRS information about financial accounts held by US taxpayers, or by foreign entities in which US taxpayers hold a substantial ownership interest,” said the website of the US Department of the Treasury.

According to some reports, tax evasion cost the US government an estimated at $305 billion (Dh1.12 trillion) in 2010 and has cost $3 trillion over the past decade. “It is a major contributor to budget deficits and the accumulation of national debt since 2001. Tax evasion also costs state treasuries billions of dollars,” said Demos, an American public policy organisation.