FATCA & CRS
SERVICES IN
SAUDI ARABIA

The main contents of the guidelines are as follows:

• Detailed explanation of financial institutions types in KSA and applicability of the CRS to reporting financial institutions.
• Detailed definitions of non-financial entities.
• Types of accounts under CRS.
• Details on procedures for reporting financial institutions to carry out due diligence to identify reportable persons including pre-existing individual customers, new individual accounts, pre-existing entity customers and new entity accounts.
• Reporting requirement of identified reportable accounts, items to be reported, reporting period and penalties for non-compliance. If no reportable accounts are identified then the reporting financial institution must file a NIL return to ZATCA via the CRS reporting portal declaring it has no reportable accounts for that calendar year or reporting period.
• Compliance, monitoring, and enforcement rules; and penalties for non-compliance by financial institutions, failure to meet CRS requirements, for lack of reasonable care, etc.

With new, rapid, and cross-border emerging markets, governments and financial institutions worldwide have set certain measures to combat tax evasion and money laundering, ensure tax compliance with the stated rules and regulations of each jurisdiction, and sustain the integrity of the tax systems. These measures include the FATCA and the CRS.

Financial institutions include retail banks, insurance companies, hedge funds, wealth managers, asset management entities, and other financial services firms which serve US and foreign nationals.

FATCA is the United States of America federal legislation that was ratified in 2010 by the Congress to target non-compliance U.S. taxpayers using foreign accounts and prevent offshore tax avoidance by U.S. citizens or residents. It requires foreign financial institutions to report on U.S. tax residents, and provide standard information including name of the taxpayer, address, place and country of birth, nationality, gross annual income, occupation, and the country of residence, tax ID number and type if the taxpayer is also a resident of another country. 

CRS on the other hand was developed in response to the G20 request, it has been enacted by the Organisation for Economic Co-operation and Development (OECD) on July 15th, 2014. It is considered a broad reporting legislation of the FATCA as at present almost more than 100 jurisdictions have adopted the CRS (excluding the United States of America), and unlike FATCA its reporting is based on tax residency and not citizenship status. 

Financial institutions in the Middle East region (including Bahrain, Kuwait, Qatar, Saudi Arabia, United Arab Emirates, Lebanon and Turkey) signed up to the CRS regime during 2018. 

Under the CRS agreed standard for Automatic Exchange of (financial account) Information (AEOI), it is mandatory for all financial institutions in participating jurisdiction to be compliant with the CRS. Financial institutions are required to identify customers who are tax residents outside of the country or jurisdiction where they maintain their accounts, obtain their financial account information on an annual basis, exchange certain information with other institutions, and report customers’ tax status with the related tax authorities where the customer is a tax resident. 

In line with the CRS requirements, the customer will be required to provide the following information as part of the self-certification declaration form: name, address, place and date of birth, list of all countries or jurisdiction of tax residency, Tax Identification Number (TIN), as well as the place for entity registration and type of entity if applicable. As well, financial account information such as depository accounts, custodial accounts, life insurance contracts, and equity and debt interests will be shared with the tax authorities. 

Yet it is important to note that CRS information requirements do differ across participating jurisdictions. Accordingly, financial institutions in participating jurisdictions need to register as reporting entities with the central bank or relevant tax authorities, which will provide the institutions with information requirements and guidance to support their CRS reporting.  

Implications of non-compliance vary amongst jurisdictions and their set of tax violations and penalties; these may impose potential commercial, reputational and financial risks. Financial institutions are penalised for non-compliance in terms of failure to establish a compliance framework, failure to document and apply the due diligence procedures, failure to identify and report accounts, and inaccurate reporting. 

Accordingly, financial institutions may avoid such risks by making sure they are in compliance with the CRS terms and obligations by regularly checking the documentation requirements issued by the OECD and CRS, following the CRS process of on-boarding new account customers in line with the CRS requirements, applying the CRS process on pre-existing account holders, formulating a compliance framework for the institution, and identifying and reporting on annual basis reportable accounts.

At Creation Business Consultants, our Tax Department ensures that our clients are in compliance with the CRS requirements through:

• Classification of entities that are subject to compliance requirements.
• Analysis of the gaps within the entities processes that need to be worked on to comply with the CRS requirements.
• Report the risks and impacts from non-compliance.
• Provide workshops, blogs, and reminder notifications to increase compliance awareness.
• Support the clients in implementing the due diligence requirements.
• Assist clients in completing the reporting requirements to the relevant authorities.
• Review the entities’ policies and frameworks to ensure they are in compliance with the CRS requirements and regulations.