UAE banks will be collecting income and tax-related information from their clients starting next year.
Local banks have started sending circulars and notifications to their expatriate customers about the new international tax evasion policies that aim to identify tax delinquents and provide a solution to stealthy tax practices. According to HSBC, the policies will come into effect January next year, and the banks will start collecting the necessary income and tax related information from its clients at the same time.
The need to identify the tax evaders have led to the launch of the CRS or the Common Reporting Standard, a piece of legislation that is being spearheaded by Organisation for Economic Co-Operation and Development (OECD), a group of 35 countries consisting mostly of European nations. CRS aims to create a transparent relationship among countries where they exchange information about the expatriate’s bank accounts, interest, acquisitions, incomes, and dividends earned from outside the country.
“Tax cheats have nowhere left to hide,” OECD secretary-general Angel Gurria said during the launch of CRS.
A similar piece of legislation was already in place for the American citizens residing abroad, called the FATCA (Foreign Account Tax Compliance Act) which helped the US government work with the banks in the UAE to identify individuals whose income is above a certain threshold. Unlike most countries, US citizens are required to pay tax if their income exceeds a certain limit, even if they live and work abroad.
UAE’s rise to becoming one of the busiest and most profitable business hubs in the world has been phenomenal. As a result, it has witnessed an increasing number of wealthy people create offshore accounts in the region and avoid tax-related responsibilities. But now, with countries forming stricter laws and levels of disclosures, the number of wilful offenders will hopefully trickle down. However, according to the UAE-based financial advisors, majority of the expats have nothing to worry about because most of the citizens belonging to the OECD nations have minimal tax limits and obligations to fulfil.
Countries currently participating in CRS:
Argentina, Belgium, Bermuda, British Virgin Islands, Cayman Islands, the Czech Republic, France, Germany, Greece, Guernsey, India, Ireland, Isle of Man, Italy, Jersey, Luxembourg, Malta, Mexico, Netherlands, Poland, South Africa, South Korea, Spain, Sweden, United Kingdom
Countries participating in CRS from 1 January 2017 onwards:
Australia, Bahamas, Bahrain, Brazil, Brunei, Darussalam, Canada, Chile, China, The Cook Islands, Hong Kong, Indonesia, Israel, Japan, Kuwait, Lebanon, Macau, Malaysia, Mauritius, Monaco, New Zealand, Panama, Qatar, Russia, Saudi Arabia, Singapore, Switzerland, Turkey, UAE, Uruguay
Not currently committed to participating in CRS:
Sri Lanka, Taiwan, Philippines, Thailand, Algeria, Armenia, Bangladesh, Egypt, Maldives, Oman, Palestine, Turkish Republic of Northern Cyprus, US, Vietnam