Cayman Islands: FATCA Reporting And International Tax Compliance: Next Steps

The following alert has been updated to reflect the Mar 19, 2015 announcement of the opening of the Cayman AEOI Portal and the removal of the mandatory requirement for a NIL return to be submitted.

DMS  reminds stakeholders of all Cayman Islands investment funds deemed Foreign Financial Institutions ("FFIs") of their International Tax Compliance ("ITC") Obligations to the Cayman Islands Tax Information Authority ("TIA") which may apply under the following:

Launch of the Cayman AEOI Portal

The Cayman Islands Department for International Tax Cooperation ("DITC") has today (March 19, 2015) announced the opening of the Cayman Automatic Exchange of Information Portal ("Portal"). FFIs can now begin their notification and reporting under the regulations listed above. FFIs can access the Portal from a direct link on the Cayman Islands government website.

The DITC has published a 'how to' User Guide 1.0 on the AEOI Portal, which provides a high-level overview of the functions which Reporting Financial Institutions ("RFIs") are expected to most commonly use in connection with Notification and Report submission. It is not exhaustive regarding all fields that will be available.

The scope is limited to U.S. FATCA only for reporting, but applies to both U.S. FATCA and U.K. FATCA for notification.

Extended Notification Deadline

The DITC has extended the deadline by which RFIs should provide notification of their FATCA reporting obligations, under the Regulation 14(3) of the Tax Information Authority ("International Tax Compliance") ("United States of America") Regulations, 2014. The prior deadline of March 31, 2015 is now changed to April 30, 2015.

FFIs should provide electronic notification to the TIA in the prescribed form including the following information:

  • Name
  • Categorization under the U.S./U.K. IGA
  • GIIN
  • The full name, address, designation and contact details of the natural person identified and authorized by the FFI to be the principal point of contact ("PPOC") for the Financial Institution for all purposes of compliance with the ITC Regulations (both U.S. and U.K.).

Electronic notification is conditional upon each RFI uploading a PDF Document on the RFI's letterhead identifying and giving authorization to the individual to be assigned as PPOC on behalf of the RFI, and signed by an appropriate person of the RFI. In turn, reporting is conditional upon that notification and without this confirmation letter, compliance will be impossible.

It is expected that most RFIs will appoint the natural person named as their FATCA Responsible Officer on the IRS FATCA FFI Registration Portal to be their PPOC with the TIA.

Reporting Deadline

RFIs should also note that May 31, 2015 is the deadline for electronic reporting to the DITC via the Cayman AEOI Portal in respect of each reportable account. There is no longer a mandatory requirement for a NIL return (where no Individual Investor invested in the Fund from July 1 to December 31, 2014 or where no Individual Investors who are specified U.S. Persons invested from July 1 to December 31, 2014).

The report should be in XML format consistent with currently published Schemas by the IRS for U.S. FATCA and by the OECD for the Common Reporting Standard ("CRS").

What's Coming Next

U.K. FATCA

Reporting for U.K. FATCA begins in 2016 and will include years 2014 and 2015. RFIs will be required to provide tax information on their U.K. taxpayers to the TIA. The TIA's information exchange with HM Revenue and Customs also begins that year.

RFIs should provide information on United Kingdom Reportable Accounts annually, including:

  • Name of the RFI
  • The RFI's GIIN
  • For each Reportable Account:
    • Personal details such as name, address, date of birth and tax numbers/U.K. National Insurance Number
    • Account balances and number (or functional equivalent)
    • Total gross amount paid or credited to Account Holder where RFI is obligor or debtor. This includes aggregate amount of any redemption payments.

The U.K. requires RFIs to earmark these reportable accounts and conduct ongoing due diligence.

Common Reporting Standard ("CRS")

Under the OECD's Common Reporting Standard, as of September 2017, tax authorities in over 50 jurisdictions — in addition to the U.S. and U.K. — will be entitled to information on accounts that individuals or entities hold in a Reportable Jurisdiction, under the tax laws of that jurisdiction.

A Reportable Jurisdiction is one that has a multilateral or bilateral Competent Authority Agreement with other jurisdictions to provide information under CRS and is on the OECD's list of such jurisdictions.

What is required?

CRS is similar to U.K. FATCA in terms of account due diligence and reporting requirements, and no withholding tax regime. Reportable information will be the same as U.K. FATCA above, with the addition of place of birth.

Cayman Islands RFIs must document all account holders existing on 31st December 2015, with the exception of entities with an account balance or value not exceeding US$250,000. There is no 'de minimis' exception for individual account holders.

RFIs should also ensure that they stay abreast of developments on the Cayman Islands TIA Tax Information Assistance website regarding their ITC obligations.

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.

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