What is the Common Reporting Standard (CRS)?
To ensure proper tax regulations observance on any financial possessions owned by US individuals, USA introduced FATCA in 2010. The FATCA (Foreign Account Tax Compliance Act) was not the only regulation implemented for complete tax transparency. There were other plans introduced as well such as the CRS, created by the Organization for Economic Cooperation and Development (OECD).
The Common Reporting Standard (CRS) has a quite similar purpose to FATCA. The CRS states that all financial institutions tax resident in a participating authority should spot and report any reportable accounts. According to the system, these are usually an individual’s tax resident in a CRS partaking jurisdiction.
The introduction of CRS itself is an example of the efforts made by the UAE government for maximum tax compliance. Along with other financial hubs like, Singapore, Switzerland, Hong Kong, UAE officially became a part of CRS and in accordance with the Cabinet Resolution Number 9 of year 2016, the UAE Government has committed to sign a Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAC) and a Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (MCAA).
UAE committed to share financial data on individuals and legal entities under Common Reporting Standards (CRS), starting from January 1st 2018.
UAE is part of the group of more than 100 countries, which have agreed on the proper implementation of tax regulations. Since it’s been implemented, the UAE’s bilateral exchange relationships are increasing and could ultimately exceed 111 jurisdictions.
What is the “CRS effect” on UAE Bank Accounts Holding Individuals?
A common question that might come to your mind could be that which account is likely to be reportable under which circumstances.
The first reporting due date for the CRS in the UAE was 30 June 2018. The reporting schedule as decided by the UAE government is 30th June of every year. The reporting process requires observance on a yearly basis starting from this year.
In the case of a UAE reportable citizen, the authorities can ask for the following data:
Date & Place of birth
Authority of residency
The Account Numbers or account closure information (if the bank account closed) & and the name of the Reporting Financial Institution (For example, bank);
The Account Balance Information
Additional Data can also be required depending on the type of the bank account you have.
All the above information is related to the Active NFE companies (Non- Financial Entity).
How Can You Know if You Are an Active or a Passive NFE?
It is important you know the difference between an active and a passive NFE. In case of an entity, you will have to evaluate whether it is a financial organization or an NFE. This is to know the current CRS position of the selected entity.
The chosen company account is an NFE only when it is not under a financial establishment. Knowing under which NFE category you fall under, it is important to know the criteria of each of the two categories. Your entity come under the ‘passive NFE’ if you fail to meet the criteria mentioned below:
The entity comes under the stock exchange.
The entity comes under the ownership of a central bank, government or an international foundation.
The entity and its assets generate less than 50% of their income as passive income.
The entity is new with a period of less than a year.
The entity is a Charity Foundation.
Before labeling the entity as active or passive, the authorities will first review the case. After proper evaluation and analysis, the authority decides to take action. The process results in the determining of an entity as passive or active.
If you have any confusion regarding CRS applications in UAE, you can always contact us. We will make sure that you are properly aware of the criteria regarding reportable and non-reportable bank account holders. Furthermore, if you have any queries regarding financial matters and residence visa, do not hesitate to give us a call at [email protected] or +971 55 1479 576 (WhatsApp)