UAE Removed From U.S. Treasury's Boycotting Countries List
The U.S. Department of the Treasury has removed the United Arab Emirates from its latest "List of Countries Requiring Cooperation With an International Boycott," easing certain tax reporting requirements.
On April 8, 2021, the U.S. Department of the Treasury ("Treasury") published its quarterly "List of Countries Requiring Cooperation With an International Boycott" (the "List"). As foreshadowed by its notice in October 2020, Treasury has now removed the United Arab Emirates ("UAE") from that List.
The UAE's removal marks the first such change to the List since 2006 and recognizes the UAE's efforts to normalize relations with Israel. On August 13, 2020, the UAE and Israel announced their agreement to the Abraham Accords (signed in September 2020). The purpose of the Accords was to establish formal diplomatic ties between the countries. Later that month, the UAE issued a decree (Federal Decree-Law No. 4 of 2020) abolishing its boycott law targeting Israel (Federal Law No. 15 of 1972) and since that time, has continued to take meaningful steps to foster ties with Israel. Although the UAE remained on Treasury's List through the first quarter of 2021, the revised List reflects U.S. acknowledgment of the UAE's commitment to its new policy.
By way of background, the United States maintains a complex antiboycott regime to preclude participation in unsanctioned foreign boycotts. That regime is administered by the Department of Commerce (whose regulations apply to U.S. persons) and Treasury (whose regulations apply to all U.S. taxpayers). Although both Treasury and Commerce impose reporting obligations, Treasury specifically requires U.S. taxpayers to report in annual tax returns: their operations in countries identified on the List; requests to cooperate with any unsanctioned boycott (in any country and even if the request is ignored or declined); and participation in any unsanctioned boycott. Failure to submit the required report(s), as well as participating in an unsanctioned boycott, can trigger significant penalties.
U.S. taxpayers doing business in the countries that remain on the List—Iraq; Kuwait; Lebanon; Libya; Qatar, Saudi Arabia; Syria; and Yemen—must continue to report their operations in those countries. While that general obligation will no longer apply to those doing business in the UAE, U.S. taxpayers are cautioned that removal of the UAE from the List does not lift all reporting obligations or entirely eliminate risk of penalty. U.S. taxpayers must still report boycott requests, and under the Commerce regulations, U.S. companies remain prohibited from participating in or cooperating with any unsanctioned boycott, even if the request emanated from the UAE. As such, U.S. taxpayers and companies should maintain internal controls and awareness to ensure ongoing compliance.
