On 16 October 2015, the Cayman Islands Government issued new regulations with respect to a global initiative on the automatic exchange of information ("AEOI") and the Common Reporting Standard ("CRS"), established to improve tax transparency in the increasingly globalised world. Links to the Tax Information Authority Law (2014 Revision) and the Tax Information Authority (Internal Tax Compliance) Common Reporting Standard Regulations, 2015 (the "Regulations") can be found here.
The new Regulations take effect on 1 January 2016.
Initiated by the Organisation for Economic Co-operation and Development ("OECD"), over 90 countries have committed to implement CRS over the next two years (including the Cayman Islands), and over 60 of these countries have signed a Multilateral Competent Authority Agreement, which permits participating countries to exchange financial account information between financial institutions.
CRS is a global model intended to standardise procedures for all Participating Jurisdictions in order to simplify the process of conducting due diligence on the financial accounts held, to increase efficiency and to reduce the overall cost to financial institutions in sharing financial account information. A link to the Tax Information Authority’s ("TIA") CRS list of Participating Jurisdictions can be found here.
The US has not agreed to adopt CRS, instead continuing to rely on FATCA and its related network of intergovernmental agreements to achieve its AEOI objectives.
How are Maples Fund Services’ clients affected?
The obligations under CRS apply to Reporting Financial Institutions ("RFIs"). The vast majority of the legal entities to which Maples Fund Services provides fund administration services will fall under the definition of RFIs and, as such, are obligated to comply with the new Regulations. Note that while there are provisions for certain exemptions under CRS, they are more limited than under FATCA, and it is anticipated that CRS will apply to a broader range of entities. For example, there is no sponsored entity, investment advisor, or investment manager exemption.
Under CRS, RFIs are required to:
- apply the due diligence procedures to all of its account holders to determine whether the account holder or controlling person is tax resident in a participating jurisdiction;
- retain the due diligence information and a record of the procedures taken to comply;
- appoint and notify the Cayman Islands TIA with the contact details of an individual authorised to be the principal point of contact for RFI; and
- electronically report to the TIA, via the AEOI portal, information in relation to all account holders identified as reportable accounts in a participating jurisdiction each year.
Important dates Cayman Islands funds need to know
- Pre-existing accounts are those open as at 31 December 2015; new accounts being those opened on or after 1 January 2016;
- due diligence procedures for identifying high-value, pre-existing individual accounts must be completed by 31 December 2016;
- due diligence procedures for identifying lower-value pre-existing individual accounts and entity accounts shall be completed by 31 December 2017;
- each RFI with reporting obligations for the 2016 calendar year will need to register with the TIA no later than 30 April 2017; and
- the first report to the TIA is in relation to reportable accounts identified during the 2016 year and is required to be filed by 31 May 2017.
How can Maples Fund Services help?
Maples Fund Services is staffed with highly-qualified professionals with extensive experience in complying with Cayman Islands Regulations. In addition, we are supported by the international law firm of Maples and Calder and the advice of the Regulatory Financial Services Group.
We offer flexible, cost-effective solutions that can be tailored to ensure every client meets its compliance requirements. This may include:
- the provision of a principal point of contact to liaise with the TIA on behalf of the RFI;
- the application of required due diligence procedures on pre-existing and new account holders;
- validation of due diligence documentation and classification of the account holders in accordance with the CRS Regulations; and
- notification to and annual filing of information in relation to reportable accounts with the TIA.
For further information or advice on the application of CRS, please speak with your usual Maples Fund Services contact or visit the Maples group's dedicated FATCA and CRS microsite.