Foreign Account and Tax Compliance Act (FATCA) is a US legislation that aims to combat tax evasion by US persons. In 2010, the US enacted FATCA to increase income tax reporting by the US taxpayers on assets held in offshore accounts and through non-US entities.
FATCA is used by government personnel to detect indicia of US persons and their assets and to enable cross-checking whether assets have been self-reported by individuals. Accordingly, the US Government has entered into bilateral agreements with the governments of several countries for exchange of information.
In addition and similar to FATCA, many countries have agreed to have a similar exchange of information by way of Common Reporting Standards (CRS), a broad reporting regime with the goal to tackle tax evasion. CRS broadly covers three dimensions, i.e., financial information to be reported, financial institutions covered, and account holders that would be subjected to reporting.
In accordance with the Cabinet Resolution Decision Number 916/9W of the calendar year 2016, the UAE signed the Convention on Mutual Administrative Assistance in Tax Matters (MAC), the Declaration of Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (MCAA) and the Unilateral Declaration in April 2017. Both the MAC and MCAA form the legal basis for the implementation of the Organisation for Economic Cooperation and Development (OECD) Standard in the UAE.
Initially, the UAE authorities had implemented application of FATCA/CRS regulations for entities based in Dubai International Financial Centre and Abu Dhabi Global Markets regions. These entities were required to carry out necessary compliances like due diligence for all the account holders, reporting on the portal provided by the authorities, undertaking a risk assessment for the accounts held by such entity, etc.
However, as a part of the UAE Ministry of Finance (MOFUAE) CRS and FATCA Compliance program, all licensed entities (i.e., those that are not licensed by ADGM, DIFC, Central Bank, Securities and Commodities Authority or the Insurance Authority) have been requested to complete their Self Certification Form (SCF).
SCF is a declaration that needs to be submitted by all the entities. This form enables entities to provide their classification status in accordance with FATCA/CRS regulations to the authorities. Though the authorities have not released an official notification in this regard, mailers have been sent to all licensed entities to ensure compliance on or before 10 March 2022.
Way Forward
Foreign Account and Tax Compliance Act (FATCA) is a US legislation that aims to combat tax evasion by US persons. In 2010, the US enacted FATCA to increase income tax reporting by the US taxpayers on assets held in offshore accounts and through non-US entities.
FATCA is used by government personnel to detect indicia of US persons and their assets and to enable cross-checking whether assets have been self-reported by individuals. Accordingly, the US Government has entered into bilateral agreements with the governments of several countries for exchange of information.
In addition and similar to FATCA, many countries have agreed to have a similar exchange of information by way of Common Reporting Standards (CRS), a broad reporting regime with the goal to tackle tax evasion. CRS broadly covers three dimensions, i.e., financial information to be reported, financial institutions covered, and account holders that would be subjected to reporting.
In accordance with the Cabinet Resolution Decision Number 916/9W of the calendar year 2016, the UAE signed the Convention on Mutual Administrative Assistance in Tax Matters (MAC), the Declaration of Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (MCAA) and the Unilateral Declaration in April 2017. Both the MAC and MCAA form the legal basis for the implementation of the Organisation for Economic Cooperation and Development (OECD) Standard in the UAE.
Nexdigm's approach towards FATCA and CRS Compliance Services
Following are Nexdigm's service offerings with respect to FATCA and CRS Compliance Services:
Entity Classification
Classification of the entity under the regulation and evaluating whether it is subject to any compliance requirement
On-boarding of Account holders
Drafting self-certification for the account holders to correctly articulate information for the purposes of reporting
Registration
Provide support in registration on US Internal Revenue System and the local portal
Due Diligence Procedures
Setting up due diligence procedures for effective implementation of the regulation
Reporting Assistance
Support with reporting to regulatory authorities
Support Services
Allocating a Principal Point of Contact to provide comprehensive assistance for seamless compliance with FATCA CRS regulations. Also assist in filing declarations like CRS risk assessment with authorities
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.
