Cayman Islands: CRS In Cayman - Ensuring Compliance

Last Updated: 22 June 2017
Article by Nick Rogers

The Common Reporting Standard (CRS) is an international tax information exchange framework that has been implemented in the Cayman Islands. Cayman companies and other vehicles must comply with the Cayman CRS regulations. Those that don't face significant penalties. Deadlines for notification (30 June) and reporting (31 July) are fast approaching.

Cayman entities should confirm their classification for the purposes of CRS. All Financial Institutions (whether Reporting or Non-Reporting) must appoint persons authorised to correspond with the tax authority and making an initial notification by 30 June. All Reporting Financial Institutions must also review any delegation of their responsibilities, adopt written policies and procedures and submit reports which are due by 31 July.

This advisory summarises the core requirements for Reporting and Non-Reporting Financial Institutions; addresses certain common misconceptions; and recommends practical steps to ensure compliance.

It is expected that CRS will be enforced in Cayman in a disciplined and systematic manner. Clients with Cayman entities must therefore focus on this now, and in particular on the key notification and reporting obligations that arise in June and July 2017.

Classification

A Cayman Islands entity which is a Financial Institution will have certain obligations under CRS. There are four categories of Financial Institution, the most common being an Investment Entity (which includes most types of investment funds). If the entity is a Financial Institution, it will either be a Reporting Financial Institution or a Non-Reporting Financial Institution.

Generally, an entity's classification under both FATCA and CRS will be the same. However, it is possible for the classification to be different. For example, Cayman investment manager and general partner entities, or sponsored investment entities, may be Reporting Financial Institutions under CRS despite being Non-Reporting Financial Institutions under FATCA.

Core requirements

Notification

Every Cayman Islands Financial Institution (including Non-Reporting Financial Institutions) must submit to the Cayman Islands Tax Information Authority (TIA) an "information notice" specifying its CRS classification and details of persons authorised to correspond with the TIA on its behalf.

The information notice must be submitted on or before 30 June 2017. Such notification (and the subsequent reporting mentioned below) is required only where the entity became a Financial Institution on or before 30 April 2017.

Financial Institutions that have previously registered with the TIA under FATCA must update their existing FATCA registration for CRS.

Due diligence procedures

A Reporting Financial Institution must identify whether it maintains reportable accounts, and must establish and maintain policies and procedures to achieve this. Due diligence on some accounts (e.g. high value individual accounts in existence as of 31 December 2015) should already have been completed.

CRS differs from FATCA in that these due diligence policies and procedures must be in writing. Where a Reporting Financial Institution is relying on a third party (e.g. the administrator) to conduct due diligence on its accounts, it must still have written policies and procedures which must describe: (i) what functions have been delegated; (ii) the management/oversight of the delegation; and (iii) the performance of any CRS obligations that have not been delegated.

Reporting

Subject to certain exceptions, each Reporting Financial Institution must report certain information with respect to each of its reportable accounts including:

  • personal details of each reportable person (including controlling persons who are reportable persons);
  • the account balance or value as of the end of the relevant calendar year or, if the account was closed during such year or period, the closure of the account; and
  • the total gross amount paid or credited to the account holder with respect to the account during the calendar year, including the aggregate amount of any redemption payments made to the account holder during the calendar year or other appropriate reporting period.

The reporting deadline for 2017, for both FATCA and CRS, has been extended to 31 July 2017. Reports must be filed through a portal maintained by the TIA. Reporting Financial Institutions must file nil returns where they did not maintain any reportable account in any reportable jurisdiction.

Liquidating Entities

Liquidating Financial Institutions that were still in existence when the portal opened for reporting on 17 May 2017 are required to comply with CRS with respect to the 2016 and 2017 reporting period. Any Financial Institution that was completely wound up (i.e. the date provided on the certificate of dissolution/strike off had passed) before 17 May 2017 will not have to make any notification or reports for CRS for 2016 or 2017.

Common misconceptions

We complied with FATCA so we don't need to comply with CRS

FATCA and CRS have been implemented under two separate sets of regulations in Cayman.  Although there are similarities, both need to be complied with.

We applied for a GIIN so we are done

Obtaining a GIIN is a necessary first step for FATCA compliance, but the TIA notification requirements under Cayman's FATCA and CRS regulations must also be complied with.

The US did not sign up to CRS so it doesn't apply to US managers

Every Cayman Islands "entity" organised under the laws of the Cayman Islands will have a classification under Cayman's FATCA and CRS regulations, regardless of where it is managed from.

I think our administrator takes care of all that

Many Reporting Financial Institutions, in particular investment funds, have delegated some or all of their FATCA and CRS obligations to their administrator. This is permitted under the regulations. However, as FATCA and CRS have evolved, it is important to recheck that the delegation is comprehensive. Notwithstanding any delegation, the Reporting Financial Institution must now have written policies and procedures that describe what functions have been delegated and the performance of any CRS obligations that have not been delegated. It is important to be clear on who is performing each function of notification, due diligence and reporting.

We didn't need to report under FATCA so we won't need to report under CRS

As noted above, in most cases, an entity's classification under both FATCA and CRS will be the same. However, it is possible for the classification to be different so care must be taken. In addition, even Non-Reporting Financial Institutions are required to make the TIA notification required by 30 June 2017.

We just need to do the same for CRS as we did for FATCA

In addition to the different classification that may apply to certain entities, two specific steps that need to be addressed for CRS are (for Reporting Financial Institutions) the adoption of written policies and procedures (see "Due diligence procedures" above), and (for all Financial Institutions) the appointment of a so-called 'change notifier'. This is an individual authorised to inform the TIA of any changes to the identity or contact details of the person notified to the TIA as the Principal Point of Contact.

Practical steps

The following steps should be taken now:

  1. Confirm classification - Certain entities which are Non-Reporting Financial Institutions for FATCA purposes will be Reporting Financial Institutions under CRS.
  2. Review delegation agreements - Reporting Financial Institutions should ensure that the role of any third parties providing CRS services is reflected in these agreements and all parties are clear as to their respective responsibilities.
  3. Adopt written policies and procedures - Reporting Financial Institutions are required to have written policies and procedures to document compliance with CRS requirements even where the due diligence and/or reporting functions are delegated to an administrator or another third party.
  4. Appoint a Principal Point of Contact (PPOC) and Change Notifier - All Financial Institutions (Reporting and Non-Reporting) are required to notify the TIA of both a PPOC and a person who is authorised to notify the TIA of any change in the PPOC.
  5. Submit information notice to the TIA - All Financial Institutions (Reporting and Non-Reporting) which became Financial Institutions on or before 30 April 2017 will need to notify the TIA of such status by 30 June 2017.
  6. Report to the TIA in respect of any reportable accounts held by Reporting Financial Institutions - most Reporting Financial Institutions are required to report by 31 July 2017 for the 2016 calendar year.
  7. Board approval - The directors or operators of Financial Institutions should document and approve these actions and determinations in board resolutions.

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.

Authors
Similar Articles
Relevancy Powered by MondaqAI
DMS Governance Ltd
 
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”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
DMS Governance Ltd
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
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).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions