The Common Reporting Standard (CRS) and the Foreign Account Tax Compliance Act (FATCA) are two global initiatives that aim to enhance tax transparency and combat tax evasion. Both CRS and FATCA require financial institutions to identify and report certain information on their account holders and/or controlling persons to the relevant tax authorities.
The United Arab Emirates (UAE) is committed to implementing both CRS and FATCA as a form of Automatic Exchange of Information (AEOI) in the UAE. The UAE has signed the Convention on Mutual Administrative Assistance in Tax Matters (MAC) and the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (MCAA) to enable the exchange of information with other jurisdictions under CRS. The UAE has also signed a Model 1 B Intergovernmental Agreement (IGA) with the United States to facilitate compliance with FATCA.
The UAE Ministry of Finance (UAE MoF) is the designated UAE Competent Authority for both CRS and FATCA. The UAE MoF has issued the Common Reporting Standard Regulations (UAE CRS) and the Foreign Account Tax Compliance Act Regulations (UAE FATCA) to implement the CRS and FATCA regimes in the UAE. The UAE CRS and UAE FATCA apply to all UAE jurisdictions, including financial free zones such as the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM).
What are the reporting obligations under CRS and FATCA?
Under CRS and FATCA, UAE Reporting Financial Institutions (UAE RFIs) are required to:
- Register on the CRS/FATCA system using the link: https://fatcacrs.mof.gov.aeand submit a risk assessment questionnaire by the stipulated deadline.
- Conduct due diligence procedures to identify the reportable accounts and/or controlling persons among their financial accounts, in accordance with the UAE CRS and UAE FATCA rules and guidance.
- Report the required information on the reportable accounts and/or controlling persons to the UAE MoF on an annual basis, using the CRS/FATCA system, by the stipulated deadline.
- Maintain records of the information collected and reported for at least six years from the end of the calendar year to which they relate.
The UAE MoF will then exchange the information with the IRS and peer jurisdictions for FATCA and CRS, respectively. The UAE MoF may also have ad hoc requests from time to time pursuant to the FATCA and CRS regimes.
Who are the UAE RFIs?
UAE RFIs are financial institutions that are resident in the UAE or have a branch in the UAE, unless they are exempted or excluded from reporting under the UAE CRS and UAE FATCA rules and guidance. UAE RFIs include:
- Depository institutions, such as banks and credit unions.
- Custodial institutions, such as custodians, brokers, and trust companies.
- Investment entities, such as funds, investment managers, and advisors.
- Specified insurance companies, such as life insurance companies and annuity providers.
Some entities may be classified as Non-Reporting Financial Institutions (NRIs) under the UAE CRS and UAE FATCA rules and guidance. NRIs are not required to register or report under CRS and FATCA, but they may have to provide certain information or certifications to other financial institutions or the UAE MoF upon request. Examples of NRIs include:
- Governmental entities, central banks, and international organizations.
- Pension funds, retirement funds, and other tax-favored accounts.
- Certain low-risk entities, such as non-profit organizations, start-up companies, and dormant entities.
How to determine the reportable accounts and/or controlling persons?
The reportable accounts and/or controlling persons are those that are subject to reporting under CRS and FATCA, based on their tax residency, citizenship, or other criteria. The reportable accounts and/or controlling persons may vary depending on the type of financial account and the type of financial institution.
For CRS, the reportable accounts are those that are held by:
- Individuals or entities that are tax resident in a reportable jurisdiction, other than the UAE.
- Passive non-financial entities (NFEs) that are tax resident in a reportable jurisdiction, other than the UAE, and have one or more controlling persons that are tax resident in a reportable jurisdiction, other than the UAE.
A reportable jurisdiction is a jurisdiction that has an agreement in place with the UAE to exchange information under CRS. The list of reportable jurisdictions can be found on the UAE MoF website: https://mof.gov.ae/fatca-and-crs/.
For FATCA, the reportable accounts are those that are held by:
- Specified US persons, which are US citizens, US residents, or certain US entities.
- Non-US entities that are wholly or partly owned by specified US persons, unless they qualify for an exemption or exception.
A US person is a person that meets any of the following criteria:
- A citizen or resident of the United States.
- A partnership or corporation organized in the United States or under the laws of the United States or any state thereof.
- A trust if (i) a court within the United States is able to exercise primary supervision over the administration of the trust, and (ii) one or more US persons have the authority to control all substantial decisions of the trust.
- An estate of a decedent that is a citizen or resident of the United States.
How to comply with the CRS and FATCA regulations?
To comply with the CRS and FATCA regulations, UAE RFIs should take the following steps:
- Assess their status and obligations under the UAE CRS and UAE FATCA rules and guidance, and seek professional advice if needed.
- Establish and implement appropriate policies and procedures to identify, document, and report the reportable accounts and/or controlling persons, in accordance with the UAE CRS and UAE FATCA rules and guidance.
- Train and educate their staff on the CRS and FATCA requirements and best practices.
- Monitor and update their compliance program regularly to ensure its effectiveness and alignment with the UAE CRS and UAE FATCA rules and guidance.
What are the benefits of complying with the CRS and FATCA regulations?
Complying with the CRS and FATCA regulations can bring the following benefits to UAE RFIs:
- Enhance their reputation and credibility as responsible and transparent financial institutions.
- Avoid the penalties and sanctions for non-compliance, which may include fines, suspension, revocation, or cancellation of licenses, and criminal prosecution.
- Facilitate their business relationships and transactions with other financial institutions and customers that are subject to CRS and FATCA.
- Contribute to the global efforts to promote tax transparency and combat tax evasion.
Contact HHS Lawyers for CRS and FATCA Compliance Services in the UAE
HHS Lawyers is a law firm that offers CRS and FATCA compliance services in the UAE. HHS Lawyers can help clients with the following aspects of CRS and FATCA compliance:
- Entity classification: HHS Lawyers can help clients determine their entity type and status for CRS and FATCA purposes, based on their legal structure, activities, and jurisdiction of incorporation.
- Registration: HHS Lawyers can assist clients with registering their entity with the Internal Revenue Service (IRS) to obtain a Global Intermediary Identification Number (GIIN) for FATCA purposes, and with the UAE Ministry of Finance to access the new reporting portal for CRS and FATCA purposes.
- Reporting: HHS Lawyers in Dubai can help clients prepare and submit the required reports to the UAE Ministry of Finance, which will exchange the information with the relevant foreign tax authorities, in accordance with the FATCA and CRS regulations and deadlines.
- Advisory: HHS Lawyers can provide clients with technical advice and guidance on FATCA and CRS matters, such as the impact assessment, the compliance program design and review, the due diligence procedures, the risk management, and the documentation requirements.
HHS Dubai Lawyers has extensive experience and expertise in handling CRS and FATCA compliance issues for clients in various sectors and industries. By engaging HHS Lawyers, clients can benefit from their professional services and ensure their compliance with the global tax reporting standards.
