So I was sitting at a presentation in Rio de Janeiro (tough life, I know) recently. The topic was regulation in offshore funds and I had finished my remarks on how awesome the Cayman Islands are and why everyone should set up funds there. I'll be honest and say that I was now looking forward to that evening's caipirinhas by the pool.

I had talked about FATCA and AIFMD as part of my section of the presentation. However the next session had many more acronyms, including OECD CRS. This acronym stuck out as a sore thumb mainly as it is the next reporting requirement to be implemented in the Cayman Islands and the British Virgin Islands.

OECD CRS stands for Organisation for Economic Co-Operation and Development. CRS stands for Common Reporting Standards. I'll bite my tongue (slightly) here and say that it would be fantastic if all the other countries in the world could get together and come up with one true reporting standard so we don't all have to suffer the various differing reporting regulations which we're all now subjected to. We're happy to help you with your tax reporting but come on, lets make it easier... but this is what the OECD are actually attempting to do. Let's all high five the OECD.....

Cayman and the BVI have recently announced that they will be implementing the OECD CRS and that implementation will be completed by September 2017 – both jurisdictions are in fact two of the frontrunners in the whole process. This is an impressive commitment and yes, we are still high-fiving ourselves but we also realise that there's some work to be done before then. So what is it? What do we now have to add to the list of things with which a Cayman or BVI fund has to comply?

Well, CRS is almost the holy grail of automatic information exchange for tax purposes. More than 90 countries have signed up to commit to its implementation. Think of this as FATCA's bigger, hopefully prettier, brother/sister (whichever is your preference!). You'll be surprised to learn that, so far, the US is hanging onto FATCA so you will have to make sure that you also continue complying with that lovely bit of legislation.

The Multilateral Convention on Mutual Administrative Assistance in Tax Matters (let's just call that the Convention from hereon in) has Cayman, the BVI and many other countries contracted to it in various manners. The Convention allows these countries to enter into agreements for automatic exchange of information with respect to tax matters. This has resulted in the Multilateral Competent Authority Agreement (let's call this the MCAA as my fingers are starting to hurt, but I do appreciate this is yet another acronym...). This in turn provides the basis on which countries can agree a common reporting standard. So you have a legal basis on which each country can agree with another country what the common reporting standards could be. But you can see the problem – Country X could have 90 agreements with different countries and this could result in many different reporting standards (US –v- UK FATCA anyone??).

So the OECD has produced its Common Reporting Standards which it hopes will be adopted by most countries. Sounds like they heard our earlier plea for simplicity!!

Both Cayman and the BVI will introduce domestic legislation to make it effective and shortly thereafter, we expect to have written guidance as to the standards themselves. As a sneak preview, we do expect some similarity with the existing FATCA regimes with some key differences (you didn't think it was going to be completely straight-forward, did you?), for example CRS will be based on tax residency not citizenship.

Funds will be expected to provide their first reporting by 31 May 2017.

Of course, we'll keep you up to date with developments on this front. Right after the next round of caipirinhas.....

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