United Arab Emirates: The Automatic Exchange Of Information In The UAE

Last Updated: 31 October 2017
Article by Eptalex  

THE UAE SIGNED A MULTILATERAL CONVENTION UNDER THE OECD: NOW WHAT?

Eptalex – MEG LEGAL SERVICES looks at the latest developments in the UAE regulatory landscape.

The UAE announced its intention to comply with OECD's Automatic Exchange of Tax Information (AEoI) in 2010 with the goal to begin reporting in 2018 for FY2017. Just over halfway through 2017, we are starting to see the pragmatic outcomes of the efforts of a country still officially in Phase II of implementation and a private sector worried about its competitive edge when becoming fully compliant with AEoI and moving toward a worldwide trend of transparency.

On April 21, 2017, the UAE signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (Convention), a multinational instrument for international tax cooperation aimed at taxation transparency and combatting money laundering and other illicit flows of liquidity. The convention details various forms of administrative assistance in tax matters, including exchange of information on request, spontaneous exchange, automatic exchange, tax examinations abroad, simultaneous tax examinations, and assistance in tax collection. The UAE joins Kuwait and Lebanon in signing the Convention in 2017. However, the UAE has not signed the Multilateral Competent Authority Agreement, which works in conjunction with the Convention, though it committed to signing it at an earlier date. With proposed first exchanges set to occur in 2018, the regulatory system of the UAE is set for some potentially drastic changes when it comes to taxes and banking and company secrecy over the next few months if compliance occurs on schedule. At the time of writing, the UAE still has not deposited any instrument of ratification or approval with the OECD, so it is difficult to say whether exchanges will happen in 2018 or not.

The OECD touts the Convention as a simpler and more standardized way to get to automatic global information exchanges without each country having to negotiate a bilateral agreement with every other country. However, not every country has been willing to jump on board with the OECD's mission, typically citing conflicts with preexisting national law, banking secrecy, concerns for beneficial owners, and so on. The UAE has taken numerous steps over the past 20 years to bring international disclosure standards to corporate governance and taxation in the UAE, like requiring companies to operate in compliance with International Accounting Standards. OECD compliance is simply the next step in the UAE continuing down this path and ensuring that more sustainable and genuinely profitable companies choose to make the UAE their home.

Financial institutions in the UAE were already reporting information on bank accounts held by tax residents of the US and certain entities controlled by such tax residents on account of signing a Model 1 intergovernmental agreement with the US, instigating FATCA in 2015. Fully applying the Convention means those reporting requirements will expand to every country that has signed the Convention. However, the Convention only has reporting requirements rather than the broader requirements within FATCA to actually withhold certain taxes, so although the reporting requirements are broader due to the increased number of jurisdictions involved, the numerated obligations are fewer for financial institutions.

Prior to the Convention, exchanging financial information on residents was typically an on-request procedure, leaving the decision to release information as a sovereign matter. Under the Convention, that information is automatically exchanged at the end of a fiscal year, absent a few exceptions meaning persons with tax residencies differing from their physical residences will typically have any tax information shared with both countries of residence. Some of those persons will need to reevaluate where assets are located and in what amounts in order to ensure they are not unnecessarily doubling their tax burden.

Fortunately for those in this situation, historically whenever a country joined the Convention or some similar automatic exchange, they typically set up a period of time for a process called voluntary disclosure. Voluntary disclosure means that non-compliant persons can inform the government of the taxes they haven't paid and pay them with little to no penalty. It decreases the cost of noncompliance for a taxpayer and encourages transparency with the tax resident country so the country of residence can properly track what amounts it should be receiving taxes on and all countries involved can help stem the flow of illicit funds through otherwise opaque systems. While countries have yet to specifically list the requirements for disclosing information about amounts in the UAE, it would be logical to expect that with the large amount of assets in the UAE, others will create or extend current voluntary disclosure options to encourage citizens and residents to comply.
These new reporting requirements will be in addition to any controlled foreign company (CFC) rules that may apply to any given person. With taxes in the UAE so low compared to most other jurisdictions, the UAE is regularly labeled as a tax haven or blacklisted, a condition that typically sets off CFC rules in other jurisdictions. CFC rules are aimed at preventing the erosion of the domestic tax base and discouraging residents from shifting income to low or no tax jurisdictions like the UAE. While these rules vary from country to country, generally they look at whether a domestic taxpayer controls the CFC, if the jurisdiction the CFC is located in imposes a tax rate substantially lower than the rate in the shareholder's country or if the CFC is located in a grey or black listed country. We can expect to see income earned in the UAE and received by those outside to be subject to much higher reporting requirements as the UAE exchanges more information and the recipient jurisdictions become more aware of how much they are not collecting. This will likely result in the amounts being taxed in both countries until the UAE is no longer blacklisted or the countries renegotiate tax treaties to remove this exception to double taxation treaties.

With such a complex network of ever expanding signatories to the OECD's agreements, new and limited voluntary disclosure periods, and developing CFC rules, companies and individuals whose assets are spread across borders will need to avail themselves of every opportunity to become knowledgeable about the compliance landscape and to comply with their tax liabilities in all countries that may have a claim to their income.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.