By Chris Tragheim From Deloitte Financial Services UK

On 5 November 2013 the Cayman Islands Government became the first Overseas Territory (OT) to sign an agreement on automatic information exchange with the UK. The Agreement is similar to the recently announced UK-Crown Dependency Agreements and is closely aligned with the key timings, requirements and definitions introduced by US FATCA.

Under the Agreement, Financial Institutions in the Cayman Islands will broadly be required to identify and report on UK Persons holding accounts. As with US FATCA and other UK Agreements, the requirements are implemented from 1 July 2014 with some tasks to complete in advance of this date.

However, it should be noted that the first reporting date in respect of UK Persons will be 2016 and, unlike the Crown Dependencies versions, there will be no reciprocal reporting requirement for UK Financial Institutions.

Interestingly, the announcement also confirmed the Cayman Islands’ commitment to developing a multilateral platform for exchange alongside the UK, France, Germany, Italy and Spain. It is understood that parties are working to agree a common global standard for information exchange by 2014 with implementation scheduled for the following year. This is a relatively tight timeline and businesses should continue to monitor development closely.

The text of the Intergovernmental Agreement can be found at:

http://tia.gov.ky/pdf/UK-Cayman_IGA_5_November_2013.pdf

Should you have any questions regarding the agreement, please contact a member of the Deloitte FATCA team, or visit our website at www.deloitte.co.uk/FATCA.

Chris Tragheim

Partner, Tax

Chris is a partner in the Financial Services Tax Group in London. He specialises in information reporting and withholding and is the global lead partner in respect of the U.S. Qualified Intermediary regime.

See also iNews Cayman related story published on November 6 2013 “Cayman Islands no longer a UK Tax retreat” that shows links to our other published stories on the same subject at: http://www.ieyenews.com/wordpress/cayman-islands-no-longer-a-uk-tax-retreat/

Related story:

Details of Cayman-UK automatic reporting agreement

From STEP

The full text has been published of the agreement under which Cayman institutions must routinely report the financial affairs of UK clients back to the UK government.

The agreement’s provisions closely resemble those of the inter-governmental agreements made by the US government with other jurisdictions regarding the US Foreign Account Tax Compliance Act (FATCA), which requires foreign banks and other financial institutions to report their American clients to the US Internal Revenue Service so that they cannot avoid being taxed on foreign income.

The Cayman Islands is the first British Overseas Territory to sign a similar agreement with the UK, though the three Crown Dependencies ‒ Jersey, Guernsey and the Isle of Man ‒ have already done so. Like the Crown Dependencies, the Cayman government has succeeded in getting an alternative, less stringent reporting regime for UK-resident non-domiciles (non-doms).

However the Cayman agreement differs from those of the Crown Dependencies in that it is not reciprocal. Only Cayman financial institutions are affected, while UK financial institutions will have no extra reporting obligations.

The Cayman government will be issuing guidance to help its institutions implement the agreement when it comes into force next year, at the same time as the US FATCA regime.

The so-called ‘UK FATCA’ inter-governmental agreements, like the Cayman one, differ from US FATCA agreements in one important respect: the UK, unlike the US, imposes personal taxes based on residency and not nationality. Thus Cayman institutions cannot use an accountholder’s passport as a test for whether the account must be reported to the UK authorities. Instead they must perform electronic searches on clients.

If a search turns up any connection between the client and the UK, then the account must be reported, unless the client can prove that he or she is not UK tax-resident. This connection can be an address in the UK, including a PO box or poste-restante address; a power of attorney with a UK address; or standing instructions on the Cayman account to transfer funds to a UK bank account.

* The Cayman Islands has also joined the OECD convention on mutual assistance in tax matters.

For more on this story go to:

http://www.step.org/details-cayman-uk-automatic-reporting-agreement