FATCA Guidance Notes Issued
The Cayman Islands Tax Information Authority ("Cayman TIA") issued the first official version of the Cayman Islands FATCA Guidance Notes (the "Guidance Notes") on 22 July 2014. A copy of the Industry Advisory and the Guidance Notes can be found here:
Defined terms and abbreviations not otherwise described herein have the same meaning given to them in our prior updates.
The Guidance Notes have been prepared over the past six months by the Working Group which was constituted from members of the private and public sector, and included Maples and Calder. The Guidance Notes provide further explanation in relation to principles underlying the intergovernmental agreements between the Cayman Islands and the US and UK (the "IGA's"), in addition to the Tax Information Authority (International Tax Compliance) (United States of America) Regulations, 2014 and the Tax Information Authority (International Tax Compliance) (United Kingdom) Regulations, 2014 (collectively, the "Regulations") issued on 4 July 2014, which provide legal obligations in relation to FATCA as a matter of Cayman Islands law.
Copies of the US and UK FATCA Regulations can be found here:
Although we shall be issuing more comprehensive updates in relation to key aspects of the Regulations and Guidance Notes over the coming weeks, we note the following important points:
(a) The Regulations and Guidance Notes assist Cayman Islands entities in determining their status as either a Financial Institution ("FI") or a Non-Financial Foreign Entity ("NFFE").
(b) The Regulations set out the fundamental obligations on a Financial Institution in relation to: (i) registration with the US IRS (for the US Regulations); (ii) notification of status to the Cayman TIA, by 31 March of the first year of reporting; (iii) identification of reportable financial accounts; (iv) initial and ongoing due diligence requirements, including timeframes; and (v) reporting of financial accounts by 31 May annually.
(c) The Regulations also provide the Cayman TIA, as the competent authority, with appropriate enforcement powers including the ability to compel disclosure of information and to inspect Reporting FIs.
(d) The Regulations also provide penalties for offences and non-compliance, including vicarious liability provisions for directors, officers etc.
(e) The Guidance Notes expand on each of these areas while also addressing the approach under both the US and UK FATCA regimes, as well as the OECD Common Reporting Standards (for certain matters).
(f) The Guidance Notes particularly focus on the classification of, and distinction between, FIs and NFFEs, Reporting FIs and Non-Reporting FIs, as well as Registered Deemed Compliant and Certified Deemed Compliant entities.
(g) The Guidance Notes import certain defined terms and concepts available under the US FATCA Regulations, including Owner Documented FIs and Limited Life Debt Investment Entities.
(h) For Investment Entities, the Guidance Notes clarify the use of the exemptions for Collective Investment Vehicle, Sponsored Investment Entities and Sponsored Closely Held Investment Vehicles, as well as more generally for Trustee Documented Trusts.
(i) The Guidance Notes provide comprehensive explanation of the due diligence procedural obligations for pre-existing and new accounts.
As noted in the Industry Advisory, the Guidance Notes (and to a certain extent the Regulations) are dynamic and will be subject to ongoing review, with the Working Group continuing to meet to assess further amendments with a view to reissuing a second version of the Guidance by Q4 2014.
For further information or advice on the application of the Regulations and Guidance Notes, please speak with your usual Maples and Calder contact, or for further information on FATCA services and solutions please speak with your usual MaplesFS contact.