The US-Cayman Islands Model 1 Inter-Governmental Agreement
(IGA) was signed and published on 29 November
2013. Whilst we are still awaiting the publication of the terms of
the Cayman Islands domestic legislation that will implement the IGA
(which we expect to be forthcoming in early in 2014), we wanted to
take the opportunity to summarise our understanding of the
requirements and responsibilities of Cayman Islands investment
funds (Funds) under the IGA and how Appleby can
assist with the Fund's obligations.
Under the IGA, a Fund is classified as a Foreign Financial
Institution (FFI), there are three broad
categories under which the Fund's obligations under the IGA
will fall – (i) registration with the IRS, (ii) due diligence
to facilitate the identification of US reportable accounts and
(iii) reporting to the Cayman Islands Tax Authority on US
reportable accounts. Under the IGA, a Fund is classified as a
Foreign Financial Institution (FFI).
Registration with the IRS
Despite not reporting directly to the IRS, a FFI (i.e. a Fund)
under the IGA is required to register with the IRS to obtain a
global intermediary identification number (GIIN). The deadline for
this filing is 31 December 2014. However, those entities registered
on or before 25 April 2014 will have the advantage of being on the
first list of GIIN numbers that will be released on 30 June 2014,
which will be of comfort to contractual counterparties.
The Fund may appoint a sponsoring entity, provided they are
authorised to act on behalf of the Fund (such as a fund manager,
fiduciary, corporate director or managing partner) to fulfil
applicable registration requirements. This may be beneficial, for
example, where there are several Funds under common management to
be registered. The sponsoring entity would then agree to perform
all due diligence, withholding, reporting and other requirements
under the IGA on behalf of all Funds it sponsors.
Registration with the IRS will be the responsibility of the
Fund, or the sponsoring entity, which must appoint a FATCA
responsible officer (FRO) for this purpose.
Appleby Trust (Cayman) Ltd. (ATCL) will be able to
assist with the administrative element of the registration process
under instruction from the Fund, if required.
Under the IGA, Funds are required to apply certain due diligence
procedures in order to identify US reportable accounts. This
process will involve, inter alia, a review all electronic
searchable information on record for U.S. indicia. This will also
involve considerable coordination by the FRO with the
administrator. The due diligence procedures are set out in Annex 1
of the IGA.
ATCL is familiar with the due diligence procedures set out in
Annex 1 of the IGA and has performed analysis to identify any
updates necessary to either their systems or processes in order to
assist the Fund to comply with these procedures.
Reporting to the Cayman Islands Tax Authority
Under the IGA, Funds will be required to report annually certain
information on US reportable accounts to the Cayman Islands Tax
Information Authority. The main body of the IGA sets out the
information that must be reported to the IRS by the Cayman Islands
Tax Information Authority, and also sets out the timing of those
The governing body of the Fund will need to formally appoint the
FRO. The role of the FRO is a specialised function that will be
responsible for ensuring appropriate reporting to the Cayman
Islands Tax Authority. ATCL will be able to contract with the Fund
to provide such reporting for the Fund's governing body, if
As well as familiarising themselves with their obligations under
the IGA and ensuring they fully understand the status and
requirements of the Fund, Fund governing bodies may also wish to
consider other matters such as communications to investors in
respect of FATCA and whether the Fund's governing and
subscription documents are required to be updated.
Appleby continues to advise its fund clients to obtain
independent tax advice in respect of FATCA. Based on our
understanding of the IGA, we consider that Funds should assume that
they will be affected in some way by FATCA unless they are advised
otherwise, regardless of whether or not the Fund has US investors
Appleby has taken significant steps over the last year in the
preparation of its FATCA Implementation Programme. Appleby is
committed to ensuring that it plays a supportive role in helping
its clients in respect of FATCA.
Appleby and ATCL will advise further in relation to FATCA and
its implementation as soon as the Cayman Islands domestic
legislation is passed into law.
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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
On the 9 September 2016 the MFSA issued feedback to its consultation of the 1 April 2016 in relation to intra-group loans.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).