Cayman Islands Signs FATCA Type IGA with UK
On 5 November 2013, the Cayman Islands signed an intergovernmental agreement with the United Kingdom ("UK IGA"), laying the foundation for the automatic exchange of financial information relating to UK tax payers who hold accounts in the Cayman Islands. The UK IGA will come into force once the internal procedures for both governments have been completed.
The Cayman Islands Government's release can be found here.
The UK IGA follows the signing of similar agreements between the UK and Jersey and Guernsey, respectively, on 22 October 2013, and the UK and Isle of Man on 10 October 2013.
The UK IGA largely tracks the draft Model IGA that the Cayman Islands has been negotiating, and recently initialled, with the US Treasury ("US IGA") in relation to the US FATCA legislation ("US FATCA Regulations").
Most of the key terms and definitions of the US IGA are reflected in the UK IGA, including the scope of the definition of a financial institution ("FI") that will be subject to the UK IGA (and related law). An FI will include a Custodial Institution, Depository Institution, Investment Entity, or a Specified Insurance Company, which in practice will cover banks, custodians, nominees, trust companies and trusts, investment funds, administrators, managers and advisers, as well as certain insurance companies.
As the UK IGA is not based on any UK legislative equivalent to the US FATCA Regulations, the UK IGA does not include provisions dealing with or otherwise relating to withholding taxes and penalties, or registration requirements. The UK IGA does however contain similar Annexes to that of the US IGA, in relation to due diligence procedures and exemptions from application. As with the US IGA, unless they can avail of one of the exemptions FIs will be obliged to undertake prescriptive due diligence obligations for identifying reportable accounts under the UK IGA.
The UK IGA compels Cayman Islands FIs to report information annually to the Cayman Islands Tax Information Authority ("Cayman TIA") on financial accounts that are held by UK individuals or entities controlled by UK persons. The Cayman TIA will then forward the UK tax payer information to HM Revenue and Customs. Additionally, the UK IGA contains details of the alternative reporting regime for UK resident non-domiciled individuals.
Steps to establish the legislative and operational framework to implement the UK IGA are underway, and the Cayman Islands Government also intends to issue guidance to assist with the implementation.
For our prior client updates on the US FATCA Regulations and the US IGA, please follow these links: