CRS and its impact on the UAE bank account holders

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.

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:

• Name
• Address
• Date & Place of birth
• TIN
• 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.

In order to determine whether your UAE Bank Account is reportable, or not it is enough to understand whether the Bank Account Holder (personal or corporate) is a Reportable Jurisdiction Person (Tax Resident in a country part of CRS) or a Tax Resident of a Non-Participating Jurisdiction, and whether he/ she is a UAE Resident.

Before going in depth to determine the criteria, it is important to know the difference between a Resident and a Non-Resident.

For an Individual in the Resident category, the following criteria are applicable:

• The individual should have a legal UAE Residence Visa along with an Emirates ID
• He/she must be a UAE national

For an Entity, the following condition is applicable:

• The Entity is acceptable only if it’s integrated, registered, managed and/or controlled within the territory of the UAE.

If you are planning to open a UAE Resident personal bank account in UAE, you should ensure the signing of the CRS document. In case of a Non-Resident account, as part of the account opening documentation.

When opening a Non-resident Personal Bank Account in the UAE, your TIN number or numbers should be provided to the bank, and this account will be considered as reportable at once.

The table below shows the classification of non-Reportable and Reportable Account Holders for you to understand:

NON-REPORTABLE	REPORTABLE
If you are a UAE citizen and you have a resident’s account, you will have to ensure the submission of the CRS form. The concerned bank will collect the form alongside the relevant documents. The form is to show that you are a UAE Tax Resident with no TIN in the UAE. This will ensure that your account is non- reportable.	If you hold a Non-Resident personal/entity account in the UAE, while not being a UAE Resident, your account will be reportable. You will have to provide a valid Tax Identification Number or numbers in the countries where you are a valid tax resident.
Personal or corporate UAE Bank Accounts opened by UAE Residents are considered as non-reportable.During the process of the account opening, CRS form should be signed, where account holders will mention themselves as UAE Residents, indicate that they have no TIN number in the UAE, and as the result, no other TIN numbers of the countries where they are tax residents, will not be asked to indicate.	In the case of a new corporate account, if the bank signatories are Non-UAE Residents, the account will be reportable. During the account opening process, you will have to provide the bank with your TIN.
Account Holder of the account (personal and corporate) tax resident in the country, which is not part of CRS.

All the above information is related to the Active NFE companies (Non- Financial Entity).

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)