On 4 July 2014, The Tax Information Authority (Amendment) (No.2) Act, 2014, The Tax Information Authority (International Tax Compliance) (United Kingdom) Regulations, 2014 (the “UK FATCA Regulations”), and The Tax Information Authority (International Tax Compliance) (United States) Regulations, 2014 (the “US Regulations”, and together with the UK Regulations, the “FATCA Regulations”) were gazetted and became effective.
The FATCA Regulations provide legal obligations of Cayman Islands Financial Institutions in relation to US and UK FATCA as a matter of Cayman Islands law. The FATCA Regulations also permit the Cayman Islands government to exchange tax information automatically under the Intergovernmental Agreements with the UK and the US (the “IGAs”) without violating Cayman law.
On 22 July 2014, the Cayman Islands government released guidance notes concerning the compliance requirements of the IGAs (the “Guidance Notes”). The Guidance Notes are intended to provide practical assistance to businesses, their advisers and the Cayman TIA in interpreting the IGAs, and will be a key component of Cayman’s automatic exchange of information regime for implementing the IGAs. Since the IGAs are based on the same model, many of the provisions are the same and are covered by the Guidance Notes. Where applicable, differences between the IGAs are noted therein.
What steps should a Cayman Islands entity be taking?
- Determine whether it, and any of its related entities or members of its expanded affiliated group, is a Financial Institution and, if so, whether it is a Reporting Financial Institution;
- If it, and any of its related entities or members of its expanded affiliated group, is a Reporting Financial Institution (or a Registered Deemed Compliant Financial Institution), each such Financial Institution should register with the IRS to obtain a GIIN;
- Implement relevant due diligence onboarding processes and procedures in relation to new accounts from 1 July 2014 to identify whether such accounts would be a reportable account, which in practice is likely to include obtaining self-certification from an account holder as to its FATCA status;
- For pre-existing accounts, review account balances and existing due diligence to determine whether sufficient information is available to identify whether an account is reportable and if not, obtain self-certification;
- Appoint a natural person to be the point of contact for all purposes of compliance with the FATCA Regulations;
- In due course, notify the Cayman TIA whether it will be required to report on financial accounts;
- When required, file relevant reports with the Cayman TIA; and
- For funds, consider updating the PPM to reflect FATCA disclosures.