On 3rd August 2020, the UAE Ministry of Finance issued updated CRS guidance. The changes in the guidance have impacts on UAE Financial Institutions (“FIs”) and their customers.
The updates to the guidance are as follows:
The updated guidance introduces new requirements in relation to the reasonableness test. This test is required to be applied to self-certifications by UAE reporting financial institutions (‘RFIs”). These changes will require RFIs to update their customer onboarding processes and it will impact a significant proportion of account openings.
The updated guidance clarifies that in order to consider a statement of “UAE tax residency for tax purposes” declared by an Account Holder or a Controlling Person (any of which a “Declaring Person”) in a self-certification is reasonable or not, an RFI should:
1. For new individual accounts:
“Enhanced Due Diligence” requires an RFI to seek answers from the Declaring Person which include (but are not limited to) the following questions:
(i) Did you obtain UAE tax residency under a residency by investment scheme?
(ii) Are you a resident in any other jurisdiction(s)?
(iii) In which jurisdiction(s) have you been subject to personal income tax during the previous calendar year?
2. For new entity accounts:
The updated guidance issued new sanctions that needs to be imposed by each regulatory authority in the UAE. The changes not only affect the FIs but should also be considered by Declaring Persons (any party that completes a self-certification).
For example, a UAE resident individual completing a self-certification to open a personal bank account could be subject to these sanctions.
1. Provision for false self-certification
2. No valid or validated self-certification