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Dubai To Fall Into Line With OECD Tax Standard

by Lorys Charalambous, Tax-News.com, Cyprus

24 September 2012


The Dubai Financial Services Authority (DFSA) is consulting on proposed legislative changes that will bring it into line with Organization of Economic Co-operation and Development (OECD) standards on the exchange of information.

The DFSA is proposing what it says is an urgent minor amendment to the Regulatory Law 2004. The amendment relates to the definition of a "privileged communication" and stems from the DFSA's involvement in a United Arab Emirates (UAE) working group led by the UAE Ministry of Finance.

This group is dealing with the assessment of the UAE by the OECD Global Forum on Transparency and the Exchange of Information for Tax Purposes on the availability of, access to and exchange of information. The Forum's Phase 1 review report on the UAE raised concerns over the definition of a "privileged communication" and the implications it has for the exchange of information.

At present, where the DFSA requires a lawyer to give information, produce a document or answer a question, and doing so would involve the lawyer's disclosure of a "privileged communication" made by, on behalf of, or to the lawyer, the lawyer is entitled to refuse to comply.

A lawyer is only obliged to make the disclosure in certain circumstances. Specifically, this can be when the person to whom, by, or on behalf of whom, the communication was made is a corporate body under official management or is being wound up, and the official manager or liquidator consents to the lawyer's disclosure. In all other cases, the person to whom, by, or on behalf of whom, the communication was made must consent to the lawyer's disclosure.

The definition of privileged communication at present reads: "a communication attracting a privilege arising from the provision of professional legal advice and any other privilege applicable at law advice or from the relationship of lawyer and client or other similar relationship, but does not include a general duty of confidentiality."

The DFSA says that as any other advice given by a lawyer to a client is covered by the definition, it can be suggested that the scope of legal privilege is wider than the international standard. This therefore has the potential to hinder the effective exchange of information. Consequently, it proposes striking the words "advice or from the relationship of lawyer and client or other similar relationship" from the definition.

Once the change is implemented, the DFSA, Dubai International Finance Centre and the UAE will all comply with the standards set by the OECD Global Forum within the required timeframe. The DFSA says that given the nature of the amendment sought and its urgency, the deadline for providing comments on the proposal is September 23, 2012.

TAGS: United Arab Emirates | compliance | tax | offshore confidentiality | tax information exchange agreement (TIEA) | tax compliance | law | banking | international financial centres (IFC) | Organisation for Economic Co-operation and Development (OECD) | offshore | standards | Dubai

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