Tax evasion: Hiding wealth in Dubai is going to get tough with stricter rules

UAE will share financial information with India from January 2018

If you are looking to make a last-ditch attempt to hide your illegal wealth in Dubai, think again because UAE will share financial information with India about people hiding their money there as well as bank account details from January 2018, reports Economic Times. 

Even though India has a competitive tax structure, the lure of avoiding taxes on money earned drives many companies and individuals to route their money out of the country through  channels such as  hawala [third parties] and shell companies. 

People usually use offshore bank accounts and other financial dealings in another country to evade regulatory oversight or tax obligations. Companies or individuals often use shell companies, initially incorporated without significant assets or operations, to disguise ownership or other information about the funds involved. 

"The modus operandi to park undisclosed funds entails buying shares of existing shell companies by using the RBIsanctioned liberalised remittance route — which allows a resident individual to invest up to $2,50,000 a year in properties and securities abroad — and later using the company’s bank account to hold untaxed money," added the ET report. 

However, opening bank accounts in Dubai is set to get tougher as banks in Dubai are pushing for tax ID of the home country, copies of passport, and, occasionally, the presence of Indian shareholders of these entities.

People who are looking to hide their money, hope to do so by masking their wealth behind special structures with professional service providers before January 2018.

Experts in foreign currency regulations told Economic Times that banks are taking more than a month to open accounts compared to 3-4 days before. 

According to senior finance professionals, Economic Times spoke to, more and more nominee directors are being used to camouflage the true ownership of such companies. 

“You buy a company remitting say $1,00,000. Later, you transfer funds lying in other destination like Switzerland and Jersey to the bank account of a Dubai company, the expert said.