Articles

AFA Client Briefing Note - Common Reporting Standard (CRS)
Jan 27, 2016

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 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 CRS, which contains the reporting and due diligence rules and,
  • The Model CAA (Competent Authority Agreement- also issued by the OECD), which contains the detailed rules on the exchange of information.

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.

  • The financial information to be reported with respect to reportable accounts includes all types of investment income.
  • The financial institutions that are required to report under the CRS not only include banks and custodians, but also other financial institutions such as brokers, certain collective investments vehicles (hedge funds/ mutual funds) and certain insurance companies.
  • Reportable accounts include accounts held by individuals and entities (which include trusts and foundations), and finally CRS includes a requirement to look through passive entities to report on the individuals that ultimately control these entities.

For additional information on CRS please contact:

Peter M.O. Young President and COO of AFA
pyoung@afaservices.com
+1 (345) 747-4232

 

Wilton G. McDonald II Attorney at Law and Director of AFA Legal
wmcdonald@afaservices.com
+1 (305) 851-2549/ +48.608.274.583

 

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