Cayman Announces Agreement of Model 1 IGA with the United States Cayman Announces Agreement of Model 1 IGA with the United States
14 Aug 2013
Discuss this development with your main FATCA advisor, as it may change the approach that is currently being considered for FATCA compliance by Cayman Islands financial institutions.
The Cayman Islands government has announced that a Model 1 non-reciprocal IGA, together with a new TIEA, have been agreed and initialled by the Cayman Islands government and the US government as of Tuesday, 13 August 2013. A copy of the announcement can be found here.
The IGA and TIEA will need to be formally signed before coming into full effect. Although subject to Governmental timetables in the US and the Cayman Islands, we would hope that signing could occur in September or October this year.
Although copies of the IGA and TIEA are not yet available for publication, the announcement eliminates any remaining uncertainty for Cayman Islands financial institutions in relation to their treatment under FATCA as Model 1 IGA Financial Institutions ("FI").
In essence, signing the IGA means:
(a) The US Treasury will treat the Cayman Islands as having an IGA in effect. The Cayman Islands will, upon signing, be added to the US Treasury's list of jurisdictions that have signed but have not yet brought into force an IGA, and will accordingly be treated as having an IGA in place for FATCA purposes;
(b) Compliance with FATCA for Cayman Islands FIs will be greatly simplified. For example, there will now be no need for each Cayman Islands FI to enter into an FFI Agreement directly with the IRS; and
(c) Cayman Islands FIs will have longer to obtain a global intermediary identification number ("GIIN"). Although a reporting Model 1 IGA FI, such as a Cayman Islands FI, will be able to register and obtain a GIIN from 1 January 2014, they will have additional time to do so compared to FIs in jurisdictions without a Model 1 IGA in place. For payments made prior to 1 January 2015, verification of a GIIN by a withholding agent is not required for a reporting Model 1 IGA FI. Accordingly, Cayman Islands FIs will have additional time beyond 1 July 2014 to register and obtain a GIIN in order to ensure that they are included on the IRS FFI list before 1 January 2015.
Henry Smith, Global Managing Partner at Maples and Calder, acknowledged the considerable efforts of the Cayman Islands government negotiating team in finalising the IGA and the Cayman Islands financial services associations in providing valuable input.
He noted, "Having an IGA in place is critical for financial centres outside of the US. Financial institutions, investment funds and their investors using the Cayman Islands will now benefit from increased certainty in preparing for any potential registration or reporting obligations under FATCA. In agreeing to the IGA and a new TIEA, the Cayman Islands, once again, has demonstrated its willingness to work with the major economies to enhance the global financial framework."
As noted previously, once the terms of the IGA are published, we shall be issuing a more comprehensive legal guide on the main implications of FATCA affecting Cayman financial institutions.
For further information please speak with your usual Maples and Calder contact or one of the partners listed above.
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