Financial Crime Prevention

Overview

Tax avoidance and tax evasion threaten government revenues. In many other countries, the lost revenues run into billions of United States dollars. The impact means fewer resources for infrastructure and services such as education and health, lowering standards of living in both developed and developing countries. Tax evasion is a predicate offence in the UAE.

Key to combating tax evasion has been international tax co-operation and the effective exchange of information between countries. The Organization for Economic Cooperation and Development (OECD) has been at the forefront of international efforts to promote all forms of information exchange - including on request, spontaneous and automatic and addressing the Base Erosion and Profit Shifting (BEPS) through economic substance tests. The UAE government is firmly committed to the above initiatives and has signed various international treaties and agreements with the United States and the OECD.

ADGM takes its responsibility as a competent authority within the UAE very seriously and continues in its support of that commitment by entering into a Memorandum of Understanding (MOU) with the Ministry of Finance (MOF) to ensure that Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS) are implemented and regulated.

The FSRA enacted regulations in July 2017 to comply with the OECD’s CRS.

Detailed information on these two regulatory reporting requirements are addressed in detail below.

Recent developments

The UAE signed the Multilateral Convention (“MLI”) to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“BEPS”) issued by the OECD on 27 June 2018. The MLI allows signing jurisdictions to implement amendments to their mutually selected Double Tax Agreements (“DTAs”) in a consistent manner.

The UAE has adopted the BEPS four minimum standards being Actions 5 (Harmful Tax Practices), 6 (Treaty Abuse), 13 (Country by Country Reporting) and 14 (Dispute Resolution).

The Cabinet of Ministers of the UAE accordingly enacted Resolution No. 31 of 2019 concerning the Economic Substance Regulations taking into account the global standards developed by the OECD and EU. The global standard set by the OECD Forum on Harmful Tax practices (FHTP) requires companies to have substantial activities in a jurisdiction.

For additional information and guidance on Economic Substance requirements you are recommended to visit Registration Authority’s Economic Substance webpage. In order to comply with BEPs Action 13, the Cabinet of Ministers of the UAE enacted Resolution No. 32 of 2019.

For further information on Country by Country Reporting, it is recommended that you visit: MOF - Country by Country Reporting.

Any company meeting the reporting threshold for this requirement must report directly to MOF on this issue.

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