CRS Update: Cayman Islands "Second Tranche"
Cayman Hedge Funds and Investment Funds need to be aware of this CRS update.
As an early adopter of the globally issued Common Reporting Standards (CRS), the Cayman Islands Government approved amendments to CRS Guidelines (known as “Second Tranche”) in December 2016 to ensure an effective and appropriate local implementation.
These amendments will be implemented in conjunction with the launch of the Cayman AEOI (Automatic Exchange of Information) portal to facilitate notification and filing (estimated completion by Q1 2017).
The Cayman Islands has also opted for a wider approach regarding CRS Due Diligence, taking into consideration that the list of Participating jurisdictions might be amended by the OECD at later stage, it now looks to identify the tax status of all investors and their controlling persons - not only the ones deemed reportable.
CRS differs from FATCA in that every Cayman Financial Institution, whether classified Reporting or Non-Reporting, has an obligation to notify the Tax Information Authority (“TIA”) by April 30, 2017 via the updated Portal. In addition to the Principal Point of Contact, the notification must also include an individual that is authorised to provide the required information of any changes to TIA with respect to the notification.
The Financial Institutions that have already notified the TIA of their status, for FATCA purposes, must still update their notifications to confirm whether they are also reportable for CRS or not.
Along with the notification, CRS also imposes the obligation to report via the Cayman AEOI Portal by May 31, 2017. The reports will be applicable to:
- Any account deemed reportable.
- Any NIL return in respect to those Reportable Jurisdictions that have no Reportable Accounts.
Despite the fact that it is mandatory, the CRS nil returns reporting procedures are expected to be much simpler than standard reporting.
Written Policies and Procedures:
Each reporting financial institution must establish and implement written policies and procedures to comply with CRS. These policies and procedures will have to address the obligations regarding due diligence, record keeping, notification and reporting to the TIA via the Cayman AEOI Portal, as well as information regarding the appointment of any third parties and cooperation with the TIA’s compliance measures.
By December 31, 2017 - Financial institutions are expected to ensure that Due Diligence Procedures are completed, at a minimum, for low-value pre existing individuals accounts and for entities accounts.
Going forward into 2017, Cayman reportable financial institutions will report on UK Reportable Persons pursuant to the CRS Regulations instead of the UK Regulations.
Penalties and Offences:
CRS offences are largely comparable to those detailed under FATCA although the financial penalties for non-compliance are more severe - CRS penalties have increased:
• Penalties up to $5,000 under the regulations for US/UK FATCA.
• Penalties up to $50,000 for any offence by a CFI or $20,000 for an offence by any other person.