It's time for another round of international tax cooperation in the Cayman Islands, and now government leaders are turning their attention to what comes next, implementing the OECD's Common Reporting Standard (CRS). The Cayman Islands Department for International Tax Compliance (DITC) has noticed local financial institutions of the next step and said the regulations to bring the CRS into force will be take place later this year.
More than 90 jurisdictions around the world have committed to the implementation of the common reporting standard to agreed timetables. Under the CRS, tax authorities in over 50 jurisdictions will be entitled to information on accounts that individuals or entities hold in a Reportable Jurisdiction, under the tax laws of that jurisdiction. At this time, Cayman has signed on as "early adopters" and is committed to undertaking the first AEOI exchanges under the CRS by 2017.
The CRS is a set of global standards for the annual exchange of financial information by financial institutions (FI's) pertaining to customers to the tax authorities of the jurisdiction in which those customers are resident for tax purposes. Like FATCA, the CRS will require FI's around the globe to play a central role in providing tax authorities with greater access and insight into taxpayer financial account data including the income earned in these accounts.
DMS officials are also reminding stakeholders that all Cayman Islands investment funds/financial institutions should now take steps to prepare for reporting and other obligations under the CRS. Executive Director and Business Unit Leader of the DMS International Tax Compliance Group, Kevin Phillip, told CNS Business, due to the number of jurisdictions implementing CRS, "that means increased compliance and increased work for all fund administrators, service providers and even the Tax Information Authority (TIA). Also given this increase, we expect that each fund may have multiple reportable accounts."
Until then, Phillip stated, what fund stakeholders should keep in mind, such as administrators, service providers, investment managers, is to keep their on-boarding documents updated.
"Funds need to unitize their boards in conjunction with managers to update sub docs for US FATCA, UK FATCA and CRS so that when the guidance notes are released, we'll have the information ready to complete all the necessary requirements by the deadlines," he explained. Phillip added, "We expect that Guidance Notes will follow the regulations, and that will tell us where there are similarities or differences with US FATCA or UK FATCA," he said.
The DMS Business Unit Leader explained the CRS will also mean wider regulatory and compliance exposure because whereas with US and UK FATCA you deal only with the IRS and HMRC, with CRS there will be multiple tax authorities that will be able to ask questions and scrutinize the investor base of reporting funds.
"There are a lot of 'ifs' until the guidance notes are released. We expect the notes will be similar to US and UK FATCA but as history has shown, we need to be prepared for changes and increased reporting requirements by having updated documents on file," he stated.
Financial Services Minister Wayne Panton said the CRS will further strengthen Cayman's already-recognised participation in the international stance to improve tax compliance.
"The CRS is an important progression in ensuring international tax compliance, across country borders", he explained. "By implementing it via the enactment of local regulations, Cayman continues to show our full participation and strength, as a member of the growing network of countries worldwide that engage in international tax cooperation."
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