On 29 November 2013, the Cayman Islands Government signed a model 1B (non-reciprocal) intergovernmental agreement (US IGA) with the United States to simplify the reporting process for Cayman Islands entities under the United States Foreign Account Tax Compliance Act (FATCA). The US IGA was just the first piece of the complex legislative process required to allow the Cayman Islands government and authorities to agree IGAs with other governments (a similar IGA was signed with the UK Government on 5 November 2013 (UK IGA)) and to implement the terms of the IGAs into domestic legislation.
On 1 July 2014, the Tax Information Authority Law underwent significant amendments to allow the Cayman Islands Tax Information Authority (TIA) to automatically exchange information with overseas tax authorities in compliance with the terms of the IGAs (and any other relevant treaties).
Within days, the Tax Information Authority (International Tax Compliance) (United States of America) Regulations, 2014 and Tax Information Authority (International Tax Compliance) (United Kingdom) Regulations, 2014 (Regulations) were passed. The Regulations transpose the key definitions and operative provisions of FATCA and the IGAs into Cayman Islands legislation. The practical result is that financial or 'FATCA' reporting compliance (aside from the requirement to register for and obtain a GIIN from the IRS) for all Cayman Islands entities is now a domestic rather than US or UK legal issue.
Completing the process, on 22 July 2014 the TIA issued its Guidance Notes on International Tax Compliance. While the Guidance Notes are not, strictly speaking, legislation, they provide useful and practical assistance and should be treated as an essential tool in understanding and complying with the Cayman Islands' FATCA reporting regime.
At more than 200 pages, the Guidance Notes provide detailed analysis - including 'real world' examples - to assist entities in determining whether or not they are impacted by the Regulations and if so, how to comply. A detailed analysis of the legislation and Guidance Notes is beyond the scope of this brief alert.
To read the Guidance Notes, please click here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.