By David Conen, Gautam Ganeshan, Bo Blocher From KPMG

October 8, 2015
As previously communicated, the Cayman Islands Tax Information Authority (“TIA”) is moving forward with the implementation of the OECD Common Reporting Standard (CRS). Currently, 61 countries have agreed to implement CRS with another 30 expected to join in subsequent years. Please see here for the full list of countries who are signatories to the CRS at: http://www.oecd.org/ctp/exchange-of-tax-information/MCAA-Signatories.pdf.

The Cayman Islands has been a signatory to CRS since its release in October 2014.

Financial institutions are advised to begin preparations for compliance with CRS and to begin planning for CRS on-boarding procedures from January 1, 2016 and for the due diligence procedures required in 2016 and 2017. As part of these steps, financial institutions are advised to consider the processes, procedures, and technological solutions necessary to be compliant with CRS. The TIA advised that the Cayman Islands regulations will be fully compliant with the CRS and to refer to the CRS issued by the OECD (available here: http://www.oecd.org/ctp/exchange-of-tax-information/standard-for-automatic-exchange-of-financial-information-in-tax-matters.htm).

On September 14, 2015, the Cayman Islands Tax Information Authority (“TIA”) released a draft version of Tax Information Authority (International Tax Compliance) (Common Reporting Standard) Regulations, 2015 (“Regulations”) for industry review and comment. The draft Regulations have been approved by the Ministry of Financial Services’ FATCA/CRS Working Group. The draft Regulations permit the use of a self-certification form, similar to FATCA, however, a recommended final form has not yet been released by the TIA. It is expected that the final regulations will be released in early October.

Impact on Cayman Islands Financial Institutions:

Refer to the CRS Timeline below for details on the deadlines with respect to remediation and reporting.

CRS may have an impact on those Financial Institutions whose classification under FATCA has been determined as a Passive NFFE as Controlling Persons of Passive NFFEs who are tax resident in participating jurisdictions will be required to be identified (as opposed to the current practice of only identifying U.S. and U.K. Controlling Persons).

Similarly, further due diligence procedures may be required by those Financial Institutions with account holders in non-participating jurisdictions (i.e. the US). Financial Institutions will be required to “look-through” the Non-Participating

Financial Institution to determine whether the Controlling Persons are
Reportable Persons.

Further, Captive Insurance Companies and Investment Managers may also be affected as the carve-outs afforded to them in the Cayman Islands Guidance Notes (section 2.11) and the IGA Annex II do not exist under CRS. These Financial Institutions will need to review their classification to determine how CRS will apply to them.

For further details on the above and how we can be of assistance, please contact a member of the AEOI team.

CRS Timeline: See attached

FATCA Updates:

IRS Notice 2015-66:

The IRS in Notice 2015-66 released on September 18, 2015, provided a welcome extension of a few important dates:

– The date on when withholding on pass through payments will take effect has been extended to January 1, 2019.
– The date on when sponsoring entities need to register their sponsored entities on the IRS Portal and obtain GIINs if the sponsored entity has a reportable U.S. person has been extended to January 1, 2017. It is noted that sponsored investment entities and sponsored controlled foreign corporations covered by Annex II of a Model 1 IGA will maintain their deemed-compliant status as long as they are registered by the sponsoring entity on or before the later of December 31, 2016, or the date that is 90 days after a U.S. reportable account is first identified.

Branch Registration:

The IRS on August 28, 2015 released an updated FAQ on branch registration clarifying questions relating to how does a branch in a Model 1 IGA or Model 2
IGA jurisdiction satisfy the FATCA registration requirements. The updated FAQs indicated that, unless a specified exception applies, a branch must register as a branch of its owner and not as a separate entity. Also, new guidance has been added to instruct branches registered as separate entities as how to correct their registration. Refer to the updated FAQ here.

Have Questions?

KPMG in the Cayman Islands has an AEOI Help Desk for any questions you may have. Contact us here: [email protected]

How can we help?

KPMG in the Cayman Islands offers the following services to assist you in your preparations for CRS:

· We can provide a detailed written summary of CRS’ impact to a
Cayman Islands Financial Institution.
· We can review the AEOI policies you have implemented providing recommendations on improvements.
· We can conduct a review to ensure the process implemented remains appropriate in face of changing legislation and upcoming requirements.

Click here: http://www.kpmg.com/KY/en/services/Tax/Documents/FATCA-Are_you_ready_529KB_PDF.pdf for more details on KPMG in the Cayman Islands’ AEOI services.

KPMG AEOI Team

David Conen
Partner
+1 345 914 4356 [email protected]

Gautam Ganeshan
Senior Manager
+1 345 914 4481 [email protected]

Bo Blocher
Manager
+1 345 914 4445 [email protected]

KPMG, P.O. Box 493 GT, Century Yard, Cricket Square, Grand Cayman, Cayman Islands KY1-1106.

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Originating source: https://home.kpmg.com/content/dam/kpmg/pdf/2015/10/tnf-cayman-fatca-oct8-2015.pdf