Common Reporting Standard (CRS) Is an initiative of OECD and endorsed by G20 to prevent Offshore Tax Evasion and proper application of tax regimes to maintain. More than 90 countries are committed to implement the CRS and UAE is of them.
How CRS Works:
In countries where CRS requirements have been enacted into local law, compliance with CRS is mandatory.
The Banks and other financial institutions are required to comply with the CRS requirements in accordance with country specific legislation.
Under the CRS, the Bank must collect certain information to establish the country (or countries) of tax residence of each of its clients. The Bank may further be obliged to report certain financial information regarding the financial accounts held by its clients to the tax authority where the account is maintained. This local tax authority may exchange this information with the tax authority of another country, subject to the information exchange agreements that are in place.
The financial information to be reported with respect to reportable accounts includes all types of investment income (including interest, dividends, income from certain insurance contracts and other similar types of income) but also account balances and sales proceeds from financial assets.
What are the tax relevant information to be obtained by the bank and shared with the UAE Ministry of Finance?
- Personal information of the account holder/authorized signatory/POA holder
- Bank account details and account balance
- Gross income from investments
Roles of UAE in the implementation of the CRS
- UAE has adopted the “Widest Approach”- it means that the Reporting Financial Institutions are required to perform a due diligence procedures and report information on all accounts held by an account holder who is resident for tax purposes in a jurisdiction other then the USA or the UAE jurisdiction. The USA is excluded because jurisdictions will be reporting to the USA under FATCA.
- Ministry of Finance is the competent authority in this respect.
- Pre-existing Accounts to be subjected to due diligence procedures are those in existence as at 31 December 2016.
- New Accounts to be subjected to due diligence procedures are those opened on or after 1 January 2017.
- First CRS reporting period ends on 31 December 2017.
- First exchanges of information will occur on or after 30 September 2018.
The entity accounts subject to review are:
- A pre-existing entity account that has an aggregate account balance or value exceeds USD 250,000 as of December 31, 2016.
- A pre-existing entity account that does not exceed USD 250,000 as of December 31, 2016 but the aggregate account balance value of which exceeds USD 250,000 as of the last day of any subsequent calendar year must be reviewed in accordance with the procedure.
- Accounts held by individuals and Passive Entities including trust and foundations
- Accounts owned/managing by a tax resident of jurisdictions other than UAE and USA.
How to Address CRS?
- Confirm with Financial institution that the account is classified as Active NFE.
- All accounts classified as Passive NFE’s should be “Restructured”.
- Avoid any POA or other signatory to any person with address in a CRS jurisdiction.
For further information, please do not hesitate to contact SPMC-Dubai.