Dubai houses built on crypto are a legal trap for Indians, Real Estate News, ET Real Estate

Many wealthy Indians are paying in cryptocurrencies to buy property in Dubai, with major realtors in the emirate accepting digital coins to cut deals.

Such transactions, although completely kosher in Dubai, which seeks to establish itself as the crypto capital of the world, could come back to haunt property owners, most of whom are subject to further regulatory and legal damages. are unknown.

They have no idea that copies of their passports, their family members or close relatives in whose name the property is registered may someday come into the hands of Indians. Income tax (IT) Department and Enforcement Directorate (ED).

With Reserve Bank of India (reserve Bank of IndiaWith the imposition of shadow bans on crypto and the Ministry of Finance almost putting assets to death, many High Net Worth Individuals (HNI) investors have moved their crypto to Dubai and other financial centres.

In the process, many may have committed many crimes, perhaps unknowingly. Firstly, the transfer of crypto from the private wallet of a resident Indian to the wallet of a real estate company in Dubai (or an intermediary hired by the developer to convert the crypto) is an unregulated cross-border transaction and is infringing of foreign exchange. Exchange Management Act (FEMA).

Second, buying assets abroad without matching fund remittances through banking channels is against RBI norms.

Understanding the laws of both nations
Third, an assessee can be drawn under the Black Money Act for non-disclosure of assets in the annual tax return (Dubai).

Finally, non-payment of tax on rent earned on offshore property is a clear case of tax evasion.

Karan Batra, a Dubai-based chartered accountant, said, “Many resident Indians invest in Dubai real estate in the greed of owning a second home or additional income.” “They should consult with tax professionals who understand the laws of both countries.”

“As Dubai wants to be a crypto hub, buying properties by paying in crypto is allowed. However, it is important to note that Dubai does not want to be home to illegal money transactions,” Batra said. “Even if a small amount is paid for the purchase of the property, it is reported to the government. Apart from disclosing the asset in the Foreign Assets Schedule of ITR (Income Tax Return), the actual Tax on rent or rent deemed to be received by an Indian resident is required to be paid in India.”

An official from DAMAC Properties, one of the top developers in Dubai, confirmed that crypto can be transferred to buy properties in Dubai and that many Indians have paid in crypto to buy homes there.
A representative of Nakheel, another leading realty group, sent the query to Haven, a digital asset-focused financial institution regulated in Switzerland and Dubai, in response to a query. An official from Haven said, “Yes, we have some property partners in Dubai, such as Nakheel and others, who are using us to process crypto payments. Your relationship manager at the property company will be able to assist you with the process. Will happen.”

Crypto is freely and easily converted into local currency in Dubai, which has traditionally been a center of currency exchange. An agent of a property management firm said that many Indians prefer to hold assets through a company set up in a free trade zone (FTZ). While the names and identity proofs of the ultimate beneficiaries of a property will be available with the FTZ authority, there is no system to share information with the Indian authorities on an automated basis.

data not shared

“The data, along with passport copies, is mainly stored for collection of stamp duty (which a property buyer has to pay in UAE),” said a property dealer. “Therefore, when the property, or the company owned by it, changes hands, the tax is collected. But it is widely believed that property ownership data cannot be easily shared. Also, it is not easy to associate a property with the owner.”

Automatic Exchange of Information (AEOI) involves a systematic transmission of information from the tax administration – such as bank accounts and related details – to the tax administration where the taxpayer is resident. The resident tax administration can then verify whether the taxpayer has provided income information accurately.

Information is shared in accordance with the Common Reporting Standards (CRS), the agreed global standard for AEOI. The required information to be reported under CRS includes financial information such as bank accounts, financial income, etc.

“However, as of today, this does not include non-financial assets such as real estate and new-age virtual digital assets such as bitcoin,” said Ayush Tandon, partner at AZB & Partners. “This leads to a situation where an individual’s home country will not be aware of its residents (whether directly or indirectly) holding an offshore real estate asset or any crypto transactions undertaken.”

Tandon said, “On a review of possible misconduct by Indians for transferring unaccounted money through crypto or offshore fixed assets, recently, the Finance Minister of India has expressed its recommendation to G20 countries… To include financial assets,” Tandon said.

According to him, the OECD Global Forum has recommended the inclusion of other asset classes – such as real estate, crypto transactions, contributions to non-profit organizations – in the data to be shared along the AEOI route. “However, barely a few countries have adopted this recommendation,” Tandon said.