Financial Crime Prevention
Overview
In 2010, the US Government enacted the Foreign Account Tax Compliance Act (FATCA). The purpose was to increase income tax reporting by US taxpayers on assets held in offshore accounts and through non-US entities.The UAE's Ministry of Finance (MOF) signed an Inter-Governmental Agreement Model 1B (IGA 1B) with the US Government in June 2015 and commenced reporting on US persons in September 2015 for balances held as at 31st December 2014.
The Common Reporting Standard (CRS), formally referred to as the Standard for Automatic Exchange of Financial Account Information, is an information standard for the automatic exchange of information (AEoI), developed in the context of the Organisation for Economic Co-operation and Development (OECD). The legal basis for exchange of data is the Convention on Mutual Administrative Assistance in Tax Matters.
The UAE signed the Mutual Administrative Assistance in Tax Matters (MAC) in April 2017 and the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (MCAA) in February 2017.
The ADGM signed a Memorandum of Understanding with the Ministry of Finance on 10th July 2016 undertaking to provide the necessary data on an annual basis enabling the UAE Government to meet its international reporting obligations.
The Foreign Account Tax Compilance ACT (FATCA)
FATCA promotes cross-border tax compliance by implementing an international standard for the automatic exchange of information related to US taxpayers. FATCA regulations require tax authorities to obtain detailed account information for US taxpayers on an annual basis.
FATCA is intended to increase transparency for the Internal Revenue Service (IRS) with respect to US persons that may be investing and earning income through non-US institutions. While the primary goal is to gain information about US persons, FATCA imposes tax withholding where the applicable documentation and reporting requirements are not met.
FATCA TIN Requirements
This document is a new requirement from the Internal Revenue Service (IRS), received via the UAE Ministry of Finance, that is applicable for Reporting Periods 2017-2019.
Common Reporting Standard (CRS)
CRS, developed by the Organisation for Economic Cooperation and Development (OECD), is a global reporting standard for the automatic exchange of information (AEoI). The goal of CRS is to allow tax authorities to obtain a clearer understanding of financial assets held abroad by their residents, for tax purposes.
Notification of collection of information under the Common Reporting Standard
The UAE commenced the reporting of information for tax purposes, pursuant to the OECD's Common Reporting Standard (CRS), in 2018. This followed the UAE Cabinet's decision for the Ministry of Finance (MoF) to co-ordinate with various government authorities and financial services regulators (including the ADGM Registration Authority and the ADGM FSRA) in order for financial institutions to collect information when implementing the UAE CRS obligations. To facilitate these reporting requirements, the MoF became a signatory to the Mutual Administrative Assistance in Tax Related Matters (MAC) and the Administrative Multilateral Competent Authority Agreement (MCAA). At that time, MoF required the relevant government authorities to issue regulations for financial institutions for the collection and reporting of this information. MOF provided guidance notes and draft regulations on CRS to assist all financial institutions to better understand the collection and reporting obligations. The UAE joined the Global Forum on Transparency and Exchange of Information for Tax Purposes in 2010
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