The United Arab Emirates is one of about 50 nations that have consented to automatically share financial information on individuals and legal entities with other nations. Banks started asking new and current account holders for additional tax related information in response to this, and they still do so today.
The Common Reporting Standard (CRS) was created by the OECD (Organisation for Economic Co operation and Development) as a universal standard to stop offshore tax evasion by sharing financial data about bank account holders.
In this blog, Dhanguard will extensively discuss why the Common Reporting Standard is important in the UAE. So without any further ado, let’s learn!
Along with a wide array of services provided, Dhanguard also helps with Mainland, Offshore and Business Account opening as well.
What is the Common Reporting Standard and why was it implemented?
In order to prevent offshore tax evasion by exchanging financial data of bank account holders, the OECD (Organization for Economic Co Operation and Development) implemented the Common Reporting Standard (CRS) as a global standard.
-
FATCA, a comparable mechanism that was already implemented in the United States in 2010, (short for: Foreign Account Tax Compliance Act).
-
The goal of this was to encourage US citizens who live or make money abroad to file more taxes.
-
CRS, also described as a "global FATCA system," is modifying this system to prevent tax evasion not only by US taxpayers and is currently evolving over the entire world with over a hundred participant countries.
-
Financial institutions in participating nations are utilized to acquire information, which is then compiled into yearly reports and submitted to the local tax authorities.
-
The entities have the ability to share all pertinent information with the tax authorities of other participating countries in the event of a probable cause of tax evasion so they can calculate the specific tax burden.
-
The tax statuses (tax residence) of the account holder are specifically mentioned in this information.
Who is obliged to share the Information and what are the consequences if they refuse to?
In order to comply with legislative requirements, financial institutions in the UAE are required to collect all pertinent data from account holders regarding their residency status for tax purposes. As a result, if the bank contacts a person who has a bank account at one of the local institutions, that person must complete the CRS Self Certification form.
-
Following that, the tax administration could ask for details, particularly if a tax residence is maintained abroad (in any of the participating countries).
-
Due to their contractual obligations to the bank, bank clients in the UAE are required to obey their instructions.
-
The bank has the right to refuse to fulfill the terms of the contract with the client or to send a report containing the data they have already collected to the local tax authorities if the client does not comply.
-
As a result, the bank may even "block" an account, making it impossible to access it until the client provides the required information.
How will CRS Reporting affect the Individuals with Bank Accounts in the UAE?
Certain accounts are likely to be reportable in which situations is one question that can cross your thoughts. In the UAE, the CRS's first due date for reporting was June 30, 2018. The UAE government has established a 30 June deadline each year for publication. Every year, the monitoring procedure shall be carried out. Whether you have a personal account, are a client who is an entity, or are a controlling individual, the tax authorities will receive information about you.
Personal Account Holders
The following information is required by the tax authorities for personal account holders:
-
Name & Address
-
Postal Code
-
Date and location of birth
-
TIN (Taxpayer identification number)
-
Residency authority
-
Account numbers or account closing details (if the bank account has been closed) as well as the name of the reporting financial institution (for example, a bank);
-
Information on the Account Balance
-
Any asset's gross proceeds from a sale or redemption
-
Depending on the type of bank account you have, you might be asked to provide additional information.
Controlling Person
The following information is required by the tax authorities for Controlling Persons:
-
Controlling person's name and address
-
Controlling person's date and place of birth
-
Taxpayer Identification Number (TIN)
-
The controlling person's type
Entity Client
The following information is required by the tax authorities for entity clients:
-
Name and mailing address
-
Taxpayer identification number (TIN)
-
Account number and balance on a certain date
-
This account's earnings
-
Any asset's gross proceeds from a sale or redemption
What Obligations does it have as the Account Holder?
In the UAE, the following responsibilities are listed while creating or maintaining a bank account:
-
It's likely that evidence of tax status will be required; if so, provide the information above in the form of a CRS Self Certification form.
-
Give a list of all the countries and regions that handle you as a tax resident, together with each one's tax identification number.
-
Tell the bank if your tax situation changes in a reasonable length of time.
What is a Tax Registration Number (TRN) in the United Arab Emirates?
TRN is a distinct 15 digit number that an entity receives following UAE VAT registration. The Authority is able to distinguish one VAT registered entity from another thanks to the TRN supplied by the FTA.
-
The organization to which the TRN is assigned is known as a Registrant, and in accordance with UAE VAT Law, the Registrant is required to mention the TRN in numerous documents pertaining to VAT.
-
When their application for UAE VAT registration is granted by the FTA, the businesses receive their TRN. After the conclusion of UAE VAT registration, the registrant automatically receives the TRN that was given by the FTA.
-
The businesses or dealers can charge VAT to the customers after they get the TRN.
The UAE's Tax Registration Number (TRN): What is its significance?
The TRN enables the monitoring of all commercial and personal transactions. The TRN also helps the seller and buyer of the items have easy communication. When reclaiming the tax paid on purchases of goods and services made by the business, the TRN is necessary.
The TRN is crucial in the following other significant circumstances:
-
A distinct identification for the registrant is provided by the TRN.
-
Customers will gladly pay the VAT amount when the TRN is shown on the registrant's Tax Invoice.
-
The TRN on the tax invoice allows the registrant to claim the VAT credit on their eligible purchases and other outgoing costs.
-
The registrant must use the TRN while speaking with FTA in any correspondence.
-
Businesses are required to provide the TRN in papers pertaining to VAT, such as
-
Tax bills from the seller, VAT reports, and tax credit notes from a company
In the UAE, who is the Appropriate Authority to oversee CRS?
The following organizations have been designated as Regulatory Authorities for the purpose of enforcing the UAE CRS Regulations:
-
When a financial institution falls under the Central Bank's purview for supervision in accordance with its applicable laws and rules.
-
The Securities and Commodities Authority, in the case of a Financial Institution covered by the Securities and Commodities Authority's supervision under the Securities and Commodities Authority's applicable laws and regulations
-
If a financial institution is under the Insurance Authority's supervision and is subject to its applicable laws and regulations
Conclusion
If you have any inquiries concerning CRS applications in the UAE, feel free to get in touch with us at Dhanguard. We'll make sure you grasp the difference between owners of reportable and non reportable bank accounts. Thus, we hope this blog provided you with insightful information. For more information on other related aspects, feel free to check out our website or visit our head office as well.
