The new OECD Common Reporting Standard (CRS) is expected to take effect this year. CRS will be fully implemented in the UAE, with regulations passed and guidance notes issued.
With the strong support of the G20 Finance Ministers, the OECD together with G20 countries and in close cooperation with the EU and other stakeholders has developed the Standard for Automatic Exchange of Financial Account Information in tax matters in September 2014 to begin exchanging info automatically by 2017 (the early adopters group) or end-2018. The timeline is still under consideration for the “CRS” referring to the Common Reporting Standard by 2018.
“CRS aims to foster an exchange of information between countries regarding expatriate or individual bank accounts, interest, dividends or incomes earned outside their home country,” says Cleofe Maceda, Senior Web Reporter, Gulf News Banking.
When the CRS implementation legislation takes effect to certify their residence for tax purposes, the actual information exchanges required under the Standard will be carried out on an annual basis with measures to ensure the highest standards of confidentiality and data safeguards (Reporting is to be reviewed using the due diligence procedures set out in the Guidance Notes for the CRS in UAE.)
This standardized automatic exchange model builds on the Foreign Account Tax Compliance Act (FATCA) IGA and is considered to be a very effective tool to counter tax evasion (prevent circumvention of anti-abuse provisions) and to increase voluntary tax compliance. It’s important to know that there’s an effective enforcement of the obligations in the CRS including penalties for non-compliance, and each affected country will need to decide the format in which they require financial institutions to report the information and relevant data of account holders for exchange (which must take place in accordance with the CRS Schema).
According to OECD’s website, the UAE and other Gulf countries will start collecting data on individuals and companies starting this year and will be ready to share the data with other international jurisdictions starting 2018, tells Babu Das Augustine, the Banking Editor of Gulf News. He said “[CRS] is requiring all banks and other financial institutions to ask customers for information with a view to determining where they are resident for tax purposes.” This exchange of information will be “implemented through both self-certification and taxpayer identification numbers.”
UAE Tax Awareness, Compliance: Get ready for CRS and VAT compliant systems; both will add to costs and regulatory burden of banks. Are You Ready To Report?
In addition to the ‘Tax Residence of a New Entity Account Holder’ also comes the collection of ‘Value-Added Tax for consumption’ and all UAE businesses are expected to implement VAT compliant systems. This goes into effect starting January 2018, according the Ministry of Finance. Both VAT and CRS computerized systems will have an impact on the business and on clients for the volume of data to be collected, stored, retrieved and reported under their local laws; so, it’s better to start putting in place the procedures required to meet VAT and CRS requirements even before it is legally implemented.