UAE to begin sharing financial records with other jurisdictions

by Clotilde

In an attempt to prevent transnational tax evasion, the OECD (the Organisation for Economic Cooperation and Development) introduced the Common Reporting Standard (also known as ‘CRS’). The CRS is a system implemented to facilitate the automatic exchange of financial information of individuals and entities between participating jurisdictions.

Participating jurisdictions produce CRS reports on an annual basis. The UAE’s commitment to the CRS commenced in January 2017, meaning that the UAE will be required to issue its first CRS report on the 30th of June 2018. The UAE will then produce a CRS report each year on the same date.

The good news for those working and living or incorporated in the UAE?

Banks and other financial institutions in the UAE are not required to conduct CRS reports on bank accounts held by tax residents of the UAE and the United States.

According to the Common Reporting Standard guidance notes published by the UAE Ministry of Finance, in order to determine whether or not an individual or company is a UAE resident for tax purposes, the following criteria will need to be satisfied:

An individual is a tax resident in the UAE if they are:

a) A UAE National; or
b) An individual who is
resident in the UAE with:
i. a valid Emirates ID
and
ii. a valid Residency Visa.

An entity is a tax resident in the UAE if it is:

a) An entity which is:
i. incorporated;
ii. registered; and
iii. managed;
within the territory of the UAE.

If an individual or entity satisfies the criteria listed above, they will be exempt from the application of the Common Reporting Standard. If an individual or entity does not satisfy the above criteria however, and is considered a tax resident of a jurisdiction participating in the CRS, then all banks and financial institutions in the UAE will be required to share the financial information they hold on such individuals/entities with the tax authority of the relevant participating jurisdiction.