Highlights of CRS in the UAE

Highlights of CRS in the UAE

11 December 2017

 

What is CRS?

CRS or the Common Reporting Standard is a worldwide measure developed following the G20 request and approved by the OECD council on 15 July 2014. It addresses the need to track and report financial information in order to curb tax evasion. The backbone of this measure is the common standard created for introducing the general reporting requirements that various countries should meet for efficient exchange of information. This standard defines the financial account information that is to be exchanged, the financial institutions that need to report, the different types of accounts and taxpayers covered as well as the standard due diligence processes to be followed by financial institutions.

What is the legal framework of CRS in the UAE?

 The first instrument issued to enable the signing of a multilateral convention on Mutual Administrative Assistance in Tax Matters (MAC) and of a Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (MCAA) was the Cabinet Resolution Number 9 issued in 2016. The MCAA defines the rules, including confidentiality and required safeguards for data privacy, related to the exchange of information between the UAE Competent Authority and partner jurisdiction Competent Authorities. The two agreements combined are the base framework for the implementation of the international OECD standard of Automatic Exchange of Information for CRS purposes (AEOI-CRS).

 Which is the competent authority for the implementation of CRS?

The competent authority for the issuance of the CRS regulations is the Ministry of Finance as per the Cabinet Resolution.

As per the Ministry’s guidance, the regulations are published by the following UAE financial institutions regulators:

• UAE Central Bank
• Securities and Commodities Authority
• Insurance Authority
• DIFC
• ADGM

What are the timelines for reporting?

The first CRS reporting period ends on 31 December 2017 and includes both pre-existing accounts (those in existence as at 31 December 2016) as wel as new accounts (those opened on or after 1 January 2017)

The first reporting date for CRS in the UAE is 30 June 2018 and consequently by 30 June of the year following each reporting period. This includes pre-existing high value individual accounts as at 31 December 2016. The low value pre-existing accounts are reviewed until 31 December 2018.

The first exchanges of information between the UAE competent Authority and the reportable jurisdictions will occur starting 30 September 2018

Who is a reportable person?

A reportable person is a person who not being a resident of the UAE or the US (residents of the US are dealt with under FATCA regulations) is a resident of a reportable jurisdiction. Where the address is not clear, an electronic data search for indicia of residence in a reportable jurisdiction must be carried out by the reporting financial institution.

For a Passive NFE (Non Financial Entity), it is the residence of the controlling person(s) which determines whether the entity is a reportable person.

The term “Controlling Person(s)” is defined as the natural person(s) who exercise(s) control over an entity in a manner consistent with the recommendations of the Finacial Action Task Force (FATF)

In the case of a trust, that term includes the settlor(s), the trustee(s), the protector(s) (if any), the beneficiary(ies) or class(es) of beneficiaries or any other natural person(s) exercising ultimate effective control over the trust.

What is reported?

Each Reporting Financial Institution must collect and report to the UAE Competent Authority the following information with respect to each Reportable Account (account of a Reportable Person):

• the name, address, jurisdiction(s) of residence, TIN(s) and date and place of birth (in the case of an individual) of each Reportable Person that is an Account Holder of the account
• the name, address, jurisdiction of residence and TIN(s) of the Entity and the name, address, jurisdiction(s) of residence, TIN(s) and date and place of birth of each Reportable Person (in the case of controlling persons);
• the account number
• the name and identifying number of the Reporting Financial Institution;
• the account balance or value (including, in the case of a Cash Value Insurance Contract or Annuity Contract, the Cash Value or surrender value) as of the end of the relevant calendar year
• in the case of any Custodial Account: (a) the total gross amount of interest, the total gross amount of dividends, and the total gross amount of other income generated with respect to the assets held in the account during the calendar year; and (b) the total gross proceeds from the sale or redemption of Financial Assets paid or credited to the account during the calendar year with respect to which the Reporting Financial Institution acted as a custodian, broker, nominee, or otherwise as an agent for the Account Holder;
• in the case of any Depository Account, the total gross amount of interest paid or credited to the account during the calendar year;
• in the case of any account not described above, the total gross amount paid or credited to the Account Holder with respect to the account during the calendar year including the aggregate amount of any redemption payments made to the Account Holder during the calendar year.

 

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