CRS Update Q1 2016

As mentioned in previous newsletters, the Cayman Islands Tax Information Authority (International Tax Compliance) (Common Reporting Standard) Regulations, 2015 (the "CRS Regulations") were brought into effect on 16 October 2015.

The CRS Regulations are the means by which the OECD Common Reporting Standard (the “CRS”), being due diligence and reporting standards for the global automatic exchange of information for tax purposes (“AEOI”), has been brought into force in the Cayman Islands with effect from 1 January 2016. It should be noted that the CRS Regulations incorporate the “wider approach”.  In this regard, the due diligence procedures in the CRS (in particular the indicia search procedures) are designed to identify Reportable Accounts understood as those of residents in a jurisdiction that is a Reportable Jurisdiction at the moment the due diligence procedures are performed. However, the Cayman Islands has adopted the “wider approach” and extended due diligence procedures to identify each jurisdiction in which an Account Holder or a Controlling Person is resident for income or corporation tax purposes. Such an approach could significantly reduce costs for Financial Institutions because they would not need to perform additional due diligence each time a new jurisdiction joins the CRS.

The Cayman Islands Ministry for Financial Services has circulated a copy of the draft CRS Guidance Notes for industry feedback.  These Guidance Notes have been developed in consultation with the Cayman Islands CRS Working Group and are intended to provide practical assistance on aspects of the CRS that are particular to the Cayman Islands and as a supplement to CRS Regulations. These Guidance Notes are not intended to replicate the information in the OECD CRS documents, such as the CRS Implementation Handbook and OECD Commentary on the CRS. 

The draft Guidance Notes make it clear that the Cayman Islands will not exchange information under CRS until it is satisfied that a partner jurisdiction has in place adequate measures to ensure the required confidentiality and date safeguards are met.

We will provide a further update when the CRS Guidance Notes have been approved and circulated.