FATCA - Next Steps for Investment Funds in the Cayman Islands

On March 19, 2015, the Cayman Islands opened the Automatic Exchange of Information Portal (“Portal”) for Cayman Islands Financial Institutions to register to notify the Cayman Islands of their status.

The Cayman Islands currently has in place an intergovernmental agreement (“IGA”) with the United States, and it has passed legislation to make compliance with the IGA a matter of Cayman Islands law.

The Cayman Islands Tax Information Authority (“TIA”) has issued Guidance Notes on the requirements of the IGA that the Cayman Island has signed with the U.S. and UK. At this point, most Cayman Island funds and investment entities have determined that they are considered Reporting Cayman Islands Financial Institutions and have obtained Global Intermediary Identification Numbers (“GIIN”). They should have also implemented procedures to identify investors whose accounts may be considered reportable accounts, including account due diligence on preexisting investors.*

Registration of a Reporting Cayman Islands Financial Institution was to take place by March 31, 2015. That date has been extended to April 30, 2015. It is also important to note that the UK and Cayman have also entered into an IGA which requires Cayman investment funds to disclose information to the TIA regarding their UK reportable accounts. Part of the registration process will include acknowledging whether or not the entity is going to be doing reporting under both the U.S. and UK regimes.

In order to register on the Portal, a Reporting Financial Institution should log onto the following address: https://caymanaeoiportal.gov.ky/VizorPortal/publicform/publicform.aspx. Alternatively, the Portal can be accessed via the main Department of International Tax Cooperation website at: www.tia.gov.ky and then selecting ‘Automatic Exchange of Information (AEOI)’ on the left hand side of the home page, followed by ‘Cayman AEOI Portal Initial SetUp (Notification).’ A user guide to the Portal can be accessed at: http://tia.gov.ky/pdf/User_Guide.pdf.

Following portal registration, the next step will be the first annual reporting on certain reportable accounts no later than May 31, 2015.

Timeline for 2015

Although the Cayman Islands Guidance Notes and Regulations indicated that Cayman Islands Financial Institutions with no reportable accounts are required to make a nil report, the TIA recently announced they will not require this.

Reporting to the TIA will be done in accordance with the published reporting schema issued by the IRS and will also be consistent with the format used by the UK, which is being developed with the OCED for the Common Reporting Standards. Information on reportable accounts will be able to be entered manually on the Portal or by submitting XML files.

  
* “Reportable accounts” are financial accounts where the account holder is either a “specified U.S. person” (broadly, any U.S. person or person liable to pay U.S. tax, with some exceptions) or is a non-U.S. entity that is a passive NFFE (as defined) the controlling persons of which include one or more specified U.S. persons. Financial accounts include any depositary or custodial accounts and also, in the case of certain investment entities, any debt or equity holdings in the FFI. In the case