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The UAE/USA Intergovernmental Agreement to implement FATCA identifies a low-risk group of UAE “Small or Limited Scope Financial Institutions” that are generally exempt from reporting obligations and registration with US IRS, as outlined in the table below. It is only the Qualified Credit Card Issuer from the list below that is also exempt from reporting under CRS.
FI TYPE | QUALIFYING CRITERIA FOR REPORTING-EXEMPT SMALL OR LIMITED SCOPE FIs UNDER FATCA |
FI WITH A LOCAL CLIENT BASE* | • Licensed & regulated in UAE. • Fixed places of business are all in UAE, except locations which only carry out administrative support functions. • Does not solicit Customers/Accountholders outside UAE (excludes operating a website or media advertising primarily in UAE, that incidentally airs in other countries AND where the publication does not specifically state that the FI provides financial services to nonresidents or otherwise target U.S customers). • Subject to mandatory UAE laws requiring identification of UAE resident Accountholders for purposes of (a) information reporting or withholding tax for financial accounts or (b) UAE AML laws. • At least 98% of financial accounts by value are held by UAE residents (individuals and/or entities). This includes accounts held by US Persons resident in UAE. • Mandatory due diligence policies and procedures are in place to (a) prevent NPFIs from establishing Financial Accounts and (b) monitor Financial Accounts of US Specified Persons who are not UAE residents (including US Citizens or US Tax Residents that are Controlling Persons of a Passive NFFE). This includes monitoring any US Person that was a UAE resident at the time the Financial Account was opened, but who subsequently ceases to be such a resident. Where Accountholders in (a) and/or (b) are found, the accounts are closed, or reported to UAE MOF in accordance with obligations governing RFIs including any mandated registration on IRS FATCA website. • Satisfies obligations for identification and reporting on Pre-existing Accounts, where applicable. • Policies & practices do not discriminate against individuals that are Specified US Persons who are also UAE residents, opening/maintaining Financial Accounts. • Related Entities are incorporated and organized in UAE, AND each satisfies the same qualifying criteria above that is applicable to the FI (except where the Related Entity is an exempt Pension Fund described in UAE/USA IGA at Annex II, Section II, Paragraphs A, B or C) |
LOCAL BANK | • Licensed & regulated in UAE. • Bank or Credit Union (CU) or similar Cooperative Credit Organization (CCO) that operates without profit. • Business activity consists primarily of receiving deposits and making loans to (a) unrelated retail customers (in the case of a Bank); and (b) members, provided the no single holds an interest in the CU/CCO that is greater than 5% (in the case of CUs/similar CCOs). • Fixed places of business are all in UAE, except locations that only carry out administrative support functions and which are not advertised to the public. • Policies and procedures are in place that prohibit soliciting of Customers/Accountholders outside UAE. This prohibition does not include operating a website, or media advertising primarily in UAE which also incidentally airs in other countries) provided the publication does not specifically state that the FI provides financial services to nonresidents or otherwise targets U.S Customers; AND (in the case of a website) it does not allow Financial Accounts to be opened. • Total Assets on the balance sheet do not exceed USD175M. • Total Assets on consolidated & combined balance sheets with any Related Entities (taken together) do not exceed USD500M. • Related Entities are incorporated and organized in UAE. • Any Related Entity that is a FI also satisfies the requirements listed above for a Local Bank (except where the Related Entity FI is an exempt Pension Fund described in UAE/USA IGA at Annex II, Section II, Paragraphs A, B or C). |
FI WITH LOW VALUE ACCOUNTS | • Is not an Investment Entity • The balance or value of each Financial Account maintained (including by any Related Entities) does not exceed USD50K (applying the rules of Account Aggregation and Currency Translation). • Maximum USD50M in assets on (a) its own balance sheet, and (b) the consolidated & combined balance sheets with any Related entities when taken together. |
QUALIFIED CREDIT CARD ISSUER** | • The Card Issuer is only a FI because it accepts payments in excess of the balance due on the card at the time of payment, and the overpayment is not immediately refunded to the Customer. • Policies and Procedures are in place to (a) prevent a customer deposit in excess of USD50K, or (b) refund any deposit in excess of USD50K within 60 days (after applying account aggregation and currency translation rules). NOTE: Customer deposit credit balances resulting from merchandise returns are included except credit balances to the extent of disputed charges. |
* An FI with a Local Client Base must report on any Financial Account (subject to exceptions and exclusions provided in the UAE/USA IGA) that it holds for a NPFI, or US Specified Person that is not a UAE Resident (including US Citizens or US Tax Residents that are Controlling Persons of a Passive NFFE).
**Applies to other card and electronic money service providers.
IGA – UAE/USA Intergovernmental Agreement dated 15 June 2015 implementing FATCA in UAE- available for download on UAE Ministry of Finance’s AEOI portal
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Contributor
Rowena Bethel is a Consultant/Advisor on FATCA and CRS compliance with
Ryja Consulting, Dubai, UAE. She is former head of the International Tax
Cooperation Unit in a Caribbean IFC and former country representative at the
OECD Global Forum on Transparency and Exchange of Tax Information. She
was a peer review assessor for the OECD Global Forum EOIR round of
assessments and also served as a member and rapporteur on the UN Committee
of Experts on International Cooperation in Tax Matters.
