Bank account information of Iqama holders: UAE ministry approached to seek access

Federal Board of Revenue (FBR) has urged the Ministry of Finance, United Arab Emirates (UAE), to convene an urgent meeting between Pakistan and UAE competent authorities to devise modalities for accessing actionable bank account information about Pakistani tax-resident persons who are purportedly hiding behind the UAE Iqama-based residential status.

In this regard, Dr Muhammad Ashfaq Ahmed, Director General (International Taxes), Federal Board of Revenue (FBR), has written a letter to Ministry of Finance UAE, seeking access to information of Pakistanis having Iqama (work permit) in the UAE.

The formal response of the UAE on the said issue is still awaited. The Iqama holders get artificial residence in the UAE due to which their accounts/balances and other tax-related information are not shared with Pakistan, the FBR added.

According to Director General International Taxes FBR, Pakistani tax authorities have suggested an urgent meeting to devise modalities to overcome the Residence by Investment (RBI) problem including operationalization of the Spontaneous Exchange of Information (SEOI) mechanism in this particular context, between Pakistan and UAE competent authorities, either in Islamabad or the UAE in the first half of November, 2019.

The FBR is still not being able to access actionable bank account information from the United Arab Emirates (UAE) about Pakistani tax-resident persons who are purportedly hiding behind UAE-Iqama based residential status, stated the FBR letter to the Finance Ministry UAE.

The Director General International Taxes FBR has referred to the schemes like Residence by Investment (RBI), which then are used to circumvent reporting of bank and financial account information under the OECD's Common Reporting Standard (CRS) framework. The issue is of critical importance to FBR as Pakistan is not being able to access actionable bank account information in respect of tax-resident persons who are purportedly hiding behind the UAE-Iqama based residential status.

Dr Muhammad Ashfaq Ahmed highlighted that tax evasion through such elitist ploys adversely affects the perception of the common citizen and there is professed commitment and resolve at the highest level of governance apparatus to address this issue on a permanent footing. In the recent meeting on exchange of information between Pakistan and the UAE held on October 9-10, 2019 in Dubai, the issue was briefly deliberated upon with a commitment by the Ministry of Finance, UAE, to come up with a formal response in due course, which is still awaited.

Given the significance of the matter, the issue was also raised by Pakistan's Finance Minister with the OECD - the sponsoring organization of CRS framework to look into the matter and come up with a solution along full spectrum.

The OECD has responded that they are tackling the issue with a two-pronged approach at jurisdiction level, through implementation of Spontaneous Exchange of Information (SEOI) mechanism to intercede in respect of potentially high risk RBI programmes, and at Financial Institution level, through publication of RBI due-diligence guidelines.

The OECD has also recommended, "In future where a jurisdiction has adopted the SEOI mechanism, the Pakistani competent authority should be made aware in cases where its tax-residents obtains citizenship or residence status via a foreign CBI/RBI program."

"We understand that the UAE authorities are grappled with the matter at their own end, too," the Director General International Taxes FBR added.

In view of the above, the FBR has suggested an urgent meeting to devise modalities to overcome the RBI problem including operationalization of the SEOI mechanism in this particular context, between Pakistan and UAE competent authorities, either in Islamabad or the UAE in the first half of November, 2019. Sources said that according to FBR estimates, 5,000 to 20,000 Pakistanis hold properties in Dubai and the FBR is trying to seek information about them. Pakistan is a significant beneficiary of the work done by the OECD towards bringing transparency in the international taxation through the exchange of actionable tax information.