The United Arab Emirates is one of around 50 countries that have agreed to share financial data on individuals and legal entities with other countries automatically. Taking this into account, banks began requesting additional tax-related details from new and existing bank account holders and continue to do so now.
The OECD (Organisation for Economic Co-operation and Development) developed the Common Reporting Standard (CRS) as a global standard to prevent offshore tax evasion by sharing financial information about bank account holders.
A similar system, known as FATCA, was adopted in the United States of America in 2010. This was intended to improve tax reporting by US citizens who live and/or receive money in other countries. CRS, also known as the "global FATCA scheme," is adapting this system to prevent tax avoidance not only by US taxpayers, but by people all over the world, with over a hundred countries participating. It is used to collect data from financial institutions in participating countries and report it to local tax authorities once a year. In the event of a possible case of tax evasion, the organisations will be able to share all relevant details with the tax authorities of other participating countries in order to assess the specific tax burden. This type of knowledge is especially relevant to the account holder's tax status (tax residency).
One query that can arise in your mind is which accounts are likely to be reportable in which circumstances.
The CRS's first reporting deadline in the UAE was June 30, 2018. The UAE government has set a deadline of 30th June each year for publishing. The monitoring process will be followed on a yearly basis.
If you are a personal account holder, an entity client, or a Controlling Individual, your details will be reported to the tax authority.
The following information is required by the tax authorities for personal account holders:
The following information is required by the tax authorities for entity clients:
The following information is required by the tax authorities for Controlling Persons:
Financial institutions in the United Arab Emirates are required by law to collect all relevant information about their account holders' tax residency status. As a result, anyone with a bank account in one of the local banks must fill out the CRS Self-Certification form when the time comes. The tax administration may then request information, especially about a foreign tax residence (in any of the participating countries).
Due to their contractual arrangement with the bank, bank customers in the UAE are required to obey their orders. If they do not follow the terms, the bank has the option of terminating the customer's contract or sending a report to the local tax authority with the details they have already gathered. As a result, the bank can close an account, which can only be reopened until the client provides the required details.
The Duties summarized when opening or holding a bank account in the UAE are as follows-
To decide if your UAE Bank Account is reportable or not, you must first determine if the Bank Account Holder (personal or corporate) is a Reportable Jurisdiction Individual (Tax Resident of a CRS-Participating Jurisdiction) or a Tax Resident of a Non-Participating Jurisdiction, as well as whether he or she is a UAE Resident.
Before diving into the parameters, it's important to understand the distinction between a Resident and a Non-Resident.
The following conditions apply to an individual in the Resident category:
The following is the condition that applies to an Entity:
If you want to open a personal bank account in the UAE as a UAE Resident, you must sign the CRS document. As part of the account opening paperwork for a Non-Resident account.
If you give your TIN number or numbers to the bank when opening a Non-resident Personal Bank Account in the UAE, the account will be deemed reportable right away.
Difference between reporting & non-reporting account has been mentioned below-
|Your account would be reportable if you have a Non-Resident personal/entity account in the UAE despite not being a UAE Resident. In the countries where you are a legal tax resident, you must have a valid Tax Identification Number.||If you are a UAE citizen with a resident's account, you must ensure that the CRS form is submitted. The type, along with the required documents, will be collected by the concerned bank. The aim of the form is to demonstrate that you are a UAE Tax Resident who does not have a TIN in the UAE. This will prevent your account from being reported.|
|If the bank signatories on a new corporate account are non-UAE residents, the account will be reportable. You will be required to provide your TIN to the bank during the account opening process.||
Non-reportable are personal or corporate UAE bank accounts opened by UAE residents.During the account opening process, account holders can sign a CRS form indicating that they are UAE residents, that they do not have a TIN number in the UAE, and that they do not have any other TIN numbers in the countries where they are tax residents.
|Account holder (personal and corporate) who is a tax resident of a country that is not part of the CRS.|
It's important to understand the distinction between an active and a passive NFE. In the case of an organization, you must determine if it is a financial corporation or a non-profit organization. This is used to determine the selected entity's current CRS location.
The chosen company account is an NFE only if it is not associated with a financial institution. Knowing the NFE group you belong to, as well as the criteria for each of the two categories, is crucial. If you don't follow the requirements mentioned below, your organization will be classified as a "passive NFE."
For the purposes of enforcing the provisions of the UAE CRS Regulations, the following authorities have been designated as Regulatory Authorities:
The UAE has chosen the "widest solution" under the CRS:
The authorities will examine the case before deciding if the individual is active or inactive. The authority agrees to take action after a thorough review and examination. The mechanism determines whether a given individual is passive or active.
You can always contact us at Dhanguard if you have any questions about CRS applications in the UAE. We'll make sure you understand the distinction between reportable and non-reportable bank account holders.
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The requirement for opening any bank account in the UAE vary from one bank to another. Although, the existence of a major director or shareholder is generally required.
A limited company should have a dedicated bank account because they have a separate legal entity.
The benefits of having business account includes tracking of the expenses, easy calculation of the tax liabilities as well as management of cash flow.
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