While much of 2020 was characterised by a high rate of regulatory activity in the Cayman Islands, the number of recent changes to laws and regulations which were enacted in the Cayman Islands over the last quarter of 2020 to date which impact, or will impact, Cayman Islands funds is relatively small compared to the previous quarters. In the main, regulatory bodies and competent authorities have focussed on welcome clarifications and refinements in respect of existing regimes. This trend has continued into January 2021 and this briefing also reflects the latest updates to various compliance deadlines published on 22 January 2021.

The Key Takeaways

New DITC Portal open for FATCA reporting only and CRS Compliance Form deadline extended

The Department for International Tax Cooperation (DITC) has indicated that, with effect from 17 December 2020, CRS Reporting has been disabled on the new DITC Portal. CRS Reporting is not expected to be re-enabled until March 2021.

Where financial institutions were unable to complete reporting by the 16 December 2020 deadline, the DITC has confirmed that there will be no automatic administrative penalties. However, this leaves open the possibility of administrative penalties being imposed in certain default circumstances. The DITC has also indicated that users will still be able to register new reporting entities on the DITC Portal, complete various updates such as principal point of contact changes, submit the new CRS Compliance Form, and submit FATCA returns. The deadline to submit the CRS Compliance Form for 2019 has been extended to 15 September 2021 (which will coincide with the deadline for 2020 reporting).

Economic Substance notification and reporting

The DITC has released the form of economic substance return (ESR) to be filed by those entities (Relevant Entities) conducting relevant activities (such as fund management business or holding company business) during the first economic reporting period commencing in 2019. The deadlines to submit ESRs have been extended as indicated below.

The DITC Portal opened on 26 January 2021 for the filing of ESRs and for relevant entities which are tax resident outside the Cayman Islands to make the appropriate filings.

Investment funds are excluded from the definition of Relevant Entities and therefore there is no requirement for such entities to submit an ESR.

All Cayman corporate entities, including investment funds, are however required to submit the annual economic substance notification confirming, amongst other things, whether or not they were a Relevant Entity during their economic reporting period commencing in 2020. This is a prerequisite to filing the entity's annual return.

Updated FAR form issued

The Cayman Islands Monetary Authority (CIMA) has issued an updated Fund Annual Return (FAR) Form reflecting the requirements introduced by the Mutual Fund (Annual Return)(Amendment) Regulations 2020. Any mutual funds with a financial year end of 30 June 2020 or later must use the updated FAR Form.

Private Funds registered under the Private Funds Law (Revised) will have a separate FAR Form. This remains under consultation and has not yet been published by CIMA.

Deadline to file annual return and pay annual fees The deadline for companies, partnerships and LLCs to file their annual return and pay their annual fees is 31 January 2021. The annual return for companies and LLCs now requires confirmation of the entity's nature of business which should be confirmed from a pre-approved list to the registered office provider in advance of the filing deadline.

New DITC Portal open for FATCA reporting only and CRS Compliance Form deadline extended

With effect from 17 December 2020, CRS Reporting has been disabled on the new portal (DITC Portal) in order to facilitate upgrades to CRS Reporting functionality. CRS Reporting is not expected to be re-enabled until March 2021. The closure of the DITC Portal reflects the 16 December 2020 deadline for the submission of CRS Returns for the 2019 Reporting Period. The DITC has indicated that, where financial institutions (FIs) were unable to login and complete reporting prior to the deadline, such FIs will not be automatically issued an administrative penalty. This reflects certain technical issues experienced by some FIs in the days immediately prior to the deadline and the DITC has therefore retained the discretion to impose administrative penalties in certain circumstances which may include, for example, where there has been no apparent attempt on the part of a given FI to comply with the filing obligations. Further, any FI which was not able to complete its filing by the 16 December 2020 deadline, will be expected to submit a CRS Return for the 2019 Reporting Period by a date to be specified by the DITC once the DITC Portal has been re-opened for CRS Reporting.

The DITC has also clarified that users are still be able to register new FIs on the DITC Portal, complete various updates such as complete AP/PPoC/Secondary User updates, submit the new CRS Compliance Form, and submit FATCA Returns.

In January, the DITC confirmed that it has extended the deadline to submit the CRS Compliance Form for the 2019 Reporting Period to 15 September 2021. This will mean that such deadline with coincide with the deadline for the submission of the CRS Compliance Form for the 2020 Reporting Period (ie filings in respect of two Reporting Periods will be due concurrently).

All FIs registered on the old AEOI portal (AEOI Portal) should have received an activation email for the new DITC Portal. The activation emails were sent from no-reply@ditc.ky. Any FI which has not received an email should check that it has not been blocked by IT screening. It is also possible to select the 'Forgotten Password' link on the new DITC Portal log in page to request a new activation email.

Any FI previously registered on the AEOI portal but which had been dissolved or wound up by the new DITC Portal launch date has not been migrated and therefore will not be visible (or able to be re-registered) on the new DITC Portal. The DITC has indicated that it is aware that such FIs would have been unable to submit any reporting or correct any errors since October 2019 as the AEOI Portal was offline. Given these FIs have not been migrated to the new DITC Portal, they will not be expected to complete any outstanding actions which were due during this time and the DITC will not enforce any penalties for the same.

For further updates and success to the DITC Portal please see the DITC webpage.

Economic Substance notification and reporting

The DITC has released on the resources page of its website the form of economic substance return (ESR) to be filed by those entities (Relevant Entities) conducting relevant activities (such as fund management business or holding company business) during the first economic reporting period commencing in 2019.

The DITC Portal opened on 26 January 2021 for the filing of ESRs and for relevant entities which are tax resident outside the Cayman Islands to make the appropriate filings.

The deadlines to submit ESRs have been extended for this year only as:

Intellectual Property Business All other Relevant Activities Tax resident outside the Cayman Islands
Where relevant financial year commenced on any date between 1 January 2019 to 1 March 2019 28 February 2021 30 April 2021 28 February 2021
Where relevant financial year commenced on any date between 2 March 2019 to 1 May 2019 12 months after the end of the relevant financial year 30 April 2021 12 months after the end of the relevant financial year
Where relevant financial year commenced on any date in 2019 but after 2 May 2019 12 months after the end of the relevant financial year 12 months after the end of the relevant financial year 12 months after the end of the relevant financial year

Investment funds are generally excluded from the definition of Relevant Entities and therefore there is no requirement for such entities to submit an ESR.

All Cayman corporate entities, including investment funds, are however required to submit the 2020 annual economic substance notification (ESN) confirming certain prescribed information including whether the entity is a Relevant Entity and, if so (or if it is claiming tax residency outside the Cayman Islands), whether it is carrying on any Relevant Activity. This is a prerequisite to filing the annual return with the Cayman Registrar of Companies or Limited Liability Companies (Registrar) and filing of the ESN is made with the Registrar for onward submission to the DITC. The deadline for submission of 2020 ESNs is 31 January 2021.

The DITC has also opened the submission window for 2021 ESNs to facilitate filings by entities who wish to file their ESNs in advance of dissolving / winding up during the forthcoming financial year. All entities dissolving/winding up in 2021 should ensure that a 2021 ESN is submitted as part of that process to avoid difficulties with subsequent obligations.

Updated FAR form issued

The Mutual Fund (Annual Return)(Amendment) Regulations 2020 which came into force last year require increased information to be submitted in a mutual fund's FAR to CIMA. This is a further initiative intended to bolster Cayman's regulatory framework in response the Caribbean Action Financial Task Force's review of Cayman's AML/CFT/CPT regime. The regulations will improve the data collected from each regulated mutual fund by CIMA and will enable CIMA to enhance its regulatory oversight of the financial services sector. CIMA has recently published a revised FAR form in line with the new Regulations (FAR Form 4.0).

Mutual funds with a year-end date prior to 30 June 2020 may have already filed the previous version of the FAR Form with CIMA and CIMA has confirmed that they may continue to submit this version of the FAR. However, from 31 March 2021 the CIMA REEFS system will only accept FAR Form 4.0 and not the prior version. Further, CIMA have confirmed that mutual funds with a financial year end of 30 June 2020 or later must use FAR Form 4.0.

Deadline to file annual return and pay annual fees

The deadline to file annual returns and pay the registrar of Companies/Partnerships/LLCs annual fee is 31 January 2021. Entities should confirm that their registered service provider is in funds to pay this as soon as the invoice is received. In addition, changes to the Companies Act (Revised) at the end of 2020 now require the annual return of every company (including LLCs) to contain details of the 'nature of business' of the company from a prescribed list of activities (examples include regulated mutual fund or registered private fund), together with details of the company's year-end. This should be confirmed with the registered office provider in advance of submission of the return. As mentioned above, the registered office provider will also be required to submit the 2020 ESN as a prerequisite to making the annual return filing and entities should ensure that their registered office provider has appropriate authority to make the ESN on the entity's behalf.

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.