The Cayman Islands Government has recently approved legislation1 (the "Second Tranche") which amends the Cayman Islands Tax Information Authority (International Tax Compliance) (Common Reporting Standard) Regulations, 2015 ("CRS Regulations"). The primary purpose of the Second Tranche is to ensure effective implementation of the Common Reporting Standard ("CRS") by the Cayman Islands as an early adopter of the CRS.
Pursuant to an industry advisory issued on 22 December 2016, the Cayman Islands Government has confirmed that the Department for International Tax Cooperation ("DITC") will publish a revised version of the CRS Guidance Notes on the DITC website in the first quarter of 2017 to reflect the Second Tranche. Industry representatives will have the opportunity to comment on the revised CRS Guidance Notes prior to publication. The DITC will also, during the first quarter of 2017, update the Cayman AEOI Portal, to facilitate notifications and filings pursuant to the CRS, and the Cayman AEOI Portal User Guide to include the CRS. The Cayman Islands is not yet able to announce a comprehensive list of Reportable Jurisdictions for the purposes of the CRS, with timing dependent upon ongoing assessments being made by the OECD.
There are certain differences in the entity classification rules under the CRS Regulations on the one hand, and the Tax Information Authority (International Tax Compliance) (United States of America) Regulations, 2014 ("FATCA") on the other. Whilst certain entities are not required to report pursuant to FATCA, such entities may have reporting and/or other obligations under the CRS Regulations, for example certain entities that are Certified Deemed Compliant Financial Institutions under FATCA may have notification and/or reporting obligations under the CRS. Existing Cayman entities should already have determined their classifications for the purposes of each of FATCA and the CRS when completing self- certification forms but, to the extent that an entity has not done so, Walkers can assist with the classification exercise.
Every Cayman Financial Institution, whether a Cayman Reporting Financial Institution ("CRFI") or a Non-Reporting Financial Institution ("NRFI"), has an obligation pursuant to the CRS Regulations to notify the Tax Information Authority ("TIA") by 30 April 2017. This differs from the position regarding FATCA where such notification was not required for CRFIs that had no reportable accounts or for NRFIs. Notification must be done via the Cayman AEOI Portal, once software revisions for the CRS have been implemented, by completing an online notification form.
CRFIs that have already notified the TIA of their status for FATCA purposes must update their notifications to confirm whether they are CRFIs or NRFIs for the purposes of the CRS, to confirm that existing information (including the Principal Point of Contact) is accurate and to provide any new required information.
Reporting obligation/ Nil returns
Each CRFI is required to report for the purposes of the CRS via the Cayman AEOI Portal by 31 May 2017 in respect of any Reportable Accounts and to file a nil return in respect of those Reportable Jurisdictions for which it has no Reportable Accounts. Unlike FATCA, nil returns are now mandatory for the CRS, although it is expected that the Cayman AEOI Portal will contain a single check box election for nil returns which should simplify the reporting process.
Written policies and procedures
Each CRFI must establish, implement and comply with written policies and procedures to comply with the CRS Regulations. The policies and procedures must state how the CRFI will address its obligations regarding due diligence, record keeping, notification of the required information and reporting to the TIA via the Cayman AEOI Portal, the appointment of any third parties, and cooperation with the TIA's compliance measures. Walkers is happy to assist with drawing up written policies and procedures to the extent that a CRFI does not already have these in place.
The Second Tranche establishes various offences which attach to CFIs or other persons for contravention of the CRS Regulations. The offences are largely comparable to those under FATCA, although the financial penalties for non-compliance are more severe.
For 2017 onwards, the Tax Information Authority (International Tax Compliance) (United Kingdom) Regulations, 2014, commonly referred to as 'UK CDOT' or 'UK FATCA' will fall away and CRFIs will report on UK Reportable Persons pursuant to the CRS Regulations.
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.