Cayman Islands Automatic Exchange of Information Update – April 2016
By Tim Clipstone, Christopher Capewell, Tim Dawson, Tim Frawley, Patrick Head, Martin Livingston, Alasdair Robertson, Tahir Jawed, Andrew Quinn, Richard Grasby, Harjit Kaur, Michael Gagie From Maples
Unless otherwise stated, capitalised terms used herein shall have the meaning given to them in prior updates.
Guidance Notes on the Common Reporting Standard Issued
The Cayman Islands Department for International Tax Cooperation (“DITC“) issued the first official version of the Cayman Islands Common Reporting Standard (“CRS“) Guidance Notes (the “Guidance Notes“) on 12 April 2016 (see the related Industry Advisory).
The Guidance Notes were issued following consultation with industry and the Working Group, which was constituted from members of the private and public sector, and included Maples and Calder.
The Guidance Notes are limited to providing guidance on practical aspects of CRS that are particular to the Cayman Islands, including how Cayman incorporates the “wider approach” and certain options available under CRS in relation to due diligence on account holders (and other matters), with a view towards reducing the costs and administrative burden on Financial Institutions, as well as improving the quality and effectiveness of the information collected.
We understand that the Guidance Notes are intended to be a dynamic document and will be subject to ongoing review by the Working Group, with a view to the DITC reissuing a second version of the Guidance Notes at the end of Q2 2016.
CRS – Ongoing Due Diligence Obligations
As noted in our prior update of 10 December 2015 and set out in the Guidance Notes, the requirements of CRS became operative in the Cayman Islands from 1 January 2016, therefore any account opened in a Cayman Islands reporting financial institution from this date is subject to new account due diligence procedures (including the account holder providing a self-certification as to tax residency) and any account opened before such date is subject to pre-existing account due diligence procedures to identify reportable accounts.
Clients are reminded that the due diligence on pre-existing high value individual accounts needs to be completed by the end of 2016. CRS reporting in 2017 will therefore include all high value individual reportable accounts that were pre-existing as of 31 December 2015 and all new reportable accounts opened from 1 January 2016 onwards.
Soft Enforcement to FATCA Notification and Reporting Deadlines
Separate to the Guidance Notes, the DITC issued an earlier industry advisory advising that it will be adopting a soft approach to the upcoming 30 April notification deadline for US and UK FATCA and 31 May reporting deadline for both US and UK FATCA for 2016.
According to the advisory, Cayman Islands reporting financial institutions that submit notifications for US and UK FATCA to the DITC on or before Friday, 10 June 2016, and file returns for both US and UK FATCA on or before Friday, 8 July 2016, will not attract any adverse consequences or enforcement measures.
The advisory confirms that the soft approach to enforcement of the notification and reporting deadlines for 2016 is in recognition of the first year of compliance for UK FATCA and the recent lack of availability of the AEOI Portal, of which an updated version of the AEOI Portal User Guide has been recently posted on the DITC website.
Updated Entity Self-Certification Form
At the same time as the Guidance Notes, the DITC published an updated Entity Self-Certification Form for use by industry going forward. The substantial change, amongst minor amendments to the existing form, being to give an account holder (to the extent that it is a Passive NFFE under US FATCA) the option to identify any “Substantial US Owner” using the US Treasury regulations definition in place of identifying any “Controlling Person”, which is still required under UK FATCA and CRS.
Upcoming Due Diligence Deadline for US and UK FATCA
Clients are reminded that under US and UK FATCA due diligence in respect of certain pre-existing accounts opened prior to 30 June 2014 (being low value individual accounts and all entity accounts over $250,000) must be completed by 30 June 2016.
UK FATCA Alternative Reporting Regime
The Alternative Reporting Regime (“ARR“) will only be available for a limited period of time under UK FATCA (before the transition to CRS in 2017) and therefore the DITC will be accepting ARR reporting via an agreed “ARR Election Template”,1 which Financial Institutions may use to provide details of any account holder who has made an election for the ARR, subject to receipt by such Cayman Islands reporting financial institution of a valid self-certification and verification of the account holder’s UK Resident Non-Domiciled status.
For further information or advice on the application of FATCA or CRS, please liaise with your usual Maples and Calder or MaplesFS contact, or any one of our AEOI experts listed above or on our dedicated FATCA and CRS webpage.
1 Further particulars can be provided on request.
