Fatca And Crs Services In The Gcc

FATCA & CRS
SERVICES IN
UAE & THE GCC

EXPERT CONSULTATION

FATCA & CRS
SERVICES IN
DUBAI, ABU DHABI
& THE UAE

Our FATCA & CRS service in Dubai, Abu Dhabi and the UAE is part of our tax consultancy services in Dubai, Abu Dhabi and the UAE.

The United Arab Emirates has signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAC) and the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (MCAA) in line with the CSR regime agreement which outline the rules and regulations on the exchange of information between the Ministry of Finance and the competent authorities of participating jurisdictions. 

As per the Cabinet Decision, the Ministry of Finance is considered UAE’s competent authority and oversees CRS implementation in the country; and the following authorities are appointed as Regulatory Authorities for implementing the provisions of the UAE CRS regulations:

Regulatory AuthorityRegulated Entity
Central BankFinancial Institution subject to its supervision under the laws and regulations of the Central Bank
Securities and Commodities AuthorityFinancial Institution subject to its supervision under the laws and regulations of the Securities and Commodities Authority
Insurance AuthorityFinancial Institution subject to its supervision under the laws and regulations of the Insurance Authority
Relevant Financial Free Zone AuthorityFinancial Institution registered in the relevant financial free zone
Ministry of FinanceFinancial Institution not
regulated by any of the above Regulatory Authorities

The first reporting period for the CRS in the UAE took place on 30 June 2018 and is consequently marked annually on June 30th of each following year. 

The CRS approach followed in the UAE requires reporting financial institutions to:

  • Perform due diligence procedure on all accounts held by an account holder (or controlling person) who is resident for tax purposes in a jurisdiction other than the United States of America.
  • Report information on all accounts held by an account holder (or controlling person) who is resident for tax purposes in a jurisdiction other than the UAE and the United States of America.

The United States of America is excluded and will be reporting to the U.S. under FATCA.

The UAE places high importance on maintaining confidentiality on exchange information under the CRS reporting, following the standards of the monitoring program of the Global Forum on Transparency and Exchange of Information for Tax Purposes; therefore, refraining from exchange of any information unless the competent partner in the participating jurisdiction has the proper measures to ensure information confidentiality and data security.

 

The Regulatory Authorities impose a number of sanctions for CRS non-compliance including:

ViolationSanction
Provision of false self-certificationAED 20,000 imposed on any Account Holder or Controlling Person
Provision of non-valid or not validating self-certificationAED 1,000 imposed on any financial institution that opens a new account without obtaining a valid self-certification or failing to validate a self-certification

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 Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (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 CSR 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 CSR requirements, applying the CSR 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 CSR 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 CSR 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 CSR requirements and regulations

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