Cayman Islands Automatic Exchange of Information Update
10 Dec 2015
The Cayman Islands Tax Information Authority ("TIA") has issued an advisory addressing several points of note regarding the Common Reporting Standard ("CRS") in the Cayman Islands.
Updated Self-Certification Forms
The TIA has published new entity and individual self-certification forms which address the account holder disclosure requirements under each of CRS, UK and US FATCA.
As CRS has been implemented in the Cayman Islands,1 Cayman Islands reporting financial institutions are required to obtain specific data in respect of new account holders with effect from 1 January 2016. The TIA forms are designed to collect such information, though use of the particular forms is not obligatory and they may be used as is, or modified. Accordingly, reporting financial institutions which are collecting customer information at the point of subscription or account opening may choose to use extracts or modified versions of the TIA forms.
We note in particular that reporting financial institutions with US reporting requirements or US counterparties may prefer to continue to use W8 and W9 forms for US FATCA purposes. Conversely, customers with no US nexus may prefer to use only the new forms, or modified versions thereof.
The TIA has published a list of 95 counterparty Participating Jurisdictions for the purposes of CRS. Cayman Islands reporting financial institutions must carry out due diligence on pre-existing and new accounts to determine their reporting requirements in respect of each Participating Jurisdiction. As noted in our previous update, the US has not agreed to adopt CRS and is therefore a Non-Participating Jurisdiction. One result of this is that managed US investment entities are treated as Passive NFEs for the purposes of CRS and will need to be looked through to determine if they are controlled by natural persons resident in a Participating Jurisdiction (which would make them a Reportable Account).
US and UK FATCA
US FATCA continues to apply as before.
The TIA advises that UK FATCA will be phased out by 2017. However, for the purposes of the 2016 reporting year there will be overlap between CRS and UK FATCA. In order to comply with both regimes, in 2017 Cayman reporting financial institutions will need to file returns under CRS, supplemented by information to satisfy the UK IGA requirements.
Limited Life Debt Investment Entities
Limited Life Debt Investment Entities (LLDIE) have been designated as "Non-Reporting Financial Institutions" and are exempt from reporting under CRS. Please refer to our separate update on this.2
It is anticipated that the Cayman Islands government will issue further legislation in Q1 2016 that will contain the enforcement powers of the TIA and related penalty provisions for failure to comply with CRS. It is also anticipated that guidance notes will be issued in Q1 2016. However, such guidance notes will be limited to practical aspects of CRS that are specific to Cayman. The TIA has made clear that CRS issues are primarily addressed in the OECD CRS Commentary and Frequently Asked Questions, which can be found on the OECD's Automatic Exchange Portal.
For further information or advice on the application of CRS, please speak with your usual Maples and Calder or MaplesFS contact, or any one of our Automatic Exchange of Information experts listed above or on our dedicated FATCA and CRS webpage.
1 Cayman Islands Issue OECD Common Reporting Standard Regulations
2 OECD CRS - Exemption Secured for 'Old and Cold' Cayman CDO/CLO Issuers
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