Advanced Fund Administration (Cayman) Ltd. and its affiliate AFA Legal Services (Cayman) Ltd. (collectively, “AFA”) operating under the Young & Young Financial Services Group banner are pleased to forward this client briefing note on the new Common Reporting Standard (CRS) requirement which was introduced into Cayman law on January 1, 2016.
The Organization for Economic Co-operation and Development (OECD) has developed the Common Reporting Standard (CRS), a global reporting initiative to facilitate the automatic exchange of financial information for tax purposes between countries that have adopted this uniform standard. CRS is viewed by industry experts as a “Global FATCA –like regime” and will impact most if not all Reporting Financial Institutions (FRIs) domiciled in the Cayman Islands from January 1st.
The Cayman Islands has adopted CRS, and has set a timetable of April 30, 2017 (now extended to August 31, 2017) for affected institutions (mainly FRIs) to notify the Department for International Tax Cooperation which is an arm of the Cayman Islands Government (the Authority) of their status. This requirement will impact both existing and new accounts. Given the certainty of this requirement coming into effect, we strongly recommend that you take the necessary steps to ensure that the entities under your control are in compliance with CRS. A key component of CRS is that “hedge funds” or mutual funds (recognized under the Mutual Funds Law (Revised) of the Cayman Islands) will have 90 days after the acceptance of new investors to collect the required certifications or must otherwise treat their investor accounts as “reportable”.
In general, this standard requires jurisdictions to obtain financial information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis. The standard consists of two components:
The good news for FRIs is that the OECD has modelled the CRS on FATCA, which means it should be possible to leverage existing and planned FATCA processes and systems. However, the data required is different, and the volume of reporting required is likely to be significantly greater under the CRS.
To prevent circumventing, the CRS is designed with a broad scope across three dimensions:
Each Cayman Islands Financial Institution must register with the Cayman Islands Tax Information Authority (TIA) for CRS purposes by July 31, 2017, even if it has no reporting obligations under CRS. Notifications are submitted electronically through the Cayman Islands reporting portal (http://www.tia.gov.ky/ ).
Each Reporting Cayman Islands Financial Institution that had “reportable accounts” for FATCA purposes during 2016 must file a 2016 FATCA report through the Cayman Islands reporting portal by August 31, 2017. Nil reporting is not required under FATCA.
Nil reporting is required under CRS. Accordingly, each Reporting Cayman Islands Financial Institution must file a 2016 CRS report through the Cayman Islands reporting portal by August 31, 2017 – as a nil report or to report information about “reportable accounts.”
For additional information on CRS please contact: