Cayman Islands - FATCA and CRS Top tips & pitfalls to avoid in 2018

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Mariah Bridges
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1 Cayman Islands - FATCA and CRS Top tips & pitfalls to avoid in 018 In this article we share our tips for reporting success for a Cayman Investment Entity Financial Institution (FI) and common pitfalls to watch out for based on our experience, plus what s coming next, including key deadlines. Five top tips for success 1 Include portal registrations in your setup For FATCA purposes, Cayman Reporting FIs need to register with the IRS for a GIIN (within 30 days of commencing business) and complete the Cayman AEOI Portal (Cayman Portal) notification (registration). For CRS purposes, both Reporting FIs and Non-Reporting FIs must complete the Cayman Portal notification. Cayman Portal notifications must be completed by 30 April in the first calendar year the entity has a notification and/or reporting obligation. > Select appropriate appointees to act as the IRS portal Responsible Officer and Cayman Portal Principal Point of Contact that will be active in the responsibilities even if it is just to oversee other users > Consider adding an IRS Point of Contact or a Secondary User to the respective portal accounts to broaden those with access and to assist with administrative tasks > Taking care of this early keeps the entity compliant and ensures you are not dealing with registrations when you are ready to submit your returns Get the right documentation All Account Holders 1 FATCA and CRS statuses and tax residences should now be determined. New Account Holders should be documented with self-certification forms at the time of opening and pre-existing Account Holder remediation was due to be completed by 31 December 017. > Ensure you have the right documentation by the required time and embed the process into your day-to-day routine to improve efficiencies > Ensure the reasonableness check includes the necessary checks and validations and know when and what supporting documentation is needed 1 Reference to an Account Holder means anyone who holds a debt or equity interest in an Investment Entity as defined in the Cayman Islands FATCA and CRS legislations.

2 3 Prepare reportable account information asap An Investment Entity Reporting FI has an obligation to determine all tax residences of its Account Holders and when reportable, further information is required on the account, Account Holder and the Account Holder s Controlling Person(s) (where applicable) > Do the leg-work in advance to ensure all necessary exchange data on reportable accounts is retrieved and ready to go even if financial data is not yet ready > Review and collate reportable account information on an ongoing basis to save on last minute communications with Account Holders for missing details 4 File early to avoid portal congestion The deadline for filing returns for the 017 reporting period is 31 May 018, however when the Cayman Portal reopens the filing can be done well in advance of the deadline. > Previous experience has shown that portal congestion can cause slow-downs and interruptions to portal access you or a service provider will likely incur less time filing the returns if done before the rush > Filing early is a safeguard in case you encounter an unexpected error and your return does not pass the validation - you will have time to resolve the issue 5 Prepare your policies and procedures The CRS Regulations require Cayman Reporting FIs to establish and maintain written policies and procedures and to implement and comply with such procedures. The Cayman Authority recognizes that Investment Entity FIs will often delegate some if not all components of the requirements to a third party service provider. > In either case, whether duties are delegated or not, this is a very useful exercise to ensure that all requirements of the regulations are being addressed > When duties have been delegated, the written policies and procedures should describe: i) what functions have been delegated; ii) the management/oversight of the delegation, and (iii) the performance of any CRS obligations that have not been delegated. Controlling Person has the definition prescribed to it in the Cayman Islands FATCA and CRS legislations

3 Five common pitfalls to avoid 1 Don t allow AEOI reporting to become a yearly project With so many demands on everyone s time, it is easy for these types of obligations to slip into yearly projects. Regulatory reporting needs to form part of the day-to-day routine to be efficient and effective. > Developing and following routine processes will help your organization maintain compliance throughout the year > Leaving the review and collation of information to be done all at one time increases stress at a time of competing demands and often requires additional resources to get the job done on time If you fail to plan you are planning to fail Develop a plan and determine who has access or who needs to be given access to information in order to execute. > If you are engaging a service provider, determine what duties you can do and what duties are best done by your service provider so you are not overlapping > Document the plan and don t wait if you need guidance on any of the aspects as they tend to snowball when not addressed > Be sure your plan includes milestones and checks and balances to gauge progress and ensure effectiveness 3 Don t underestimate the ongoing obligations of a Reporting FI Complying with the FATCA and CRS regulations involves more than registration and reporting. Here are a few other important considerations and obligations for a Reporting FI: > Onboarding procedures should include what documentation to get and what is the escalation process for when documentation is not forthcoming > monitoring for a change of circumstance and having a process in place to obtain and document new information > identifying and reporting accounts that closed during the reporting period > retaining the documents and records that relate to the information required to be reported for a period of six years > keeping the IRS portal and Cayman Portal login information secure and the portal accounts up-to-date > staying abreast of new developments in the AEOI legislation, guidance and best practice and in technological changes to the portals 4 Don t compromise with account holders The legislation puts responsibility on the Reporting FI to collect certain information from Account Holders and Controlling Persons. Don t let Account Holders or their intermediaries make you compromise your compliance with the legislation. > A Reporting FI has a legal duty to obtain the necessary information and Account Holders reluctant to comply should be reminded the requirements are a result of the cooperation between many countries and the information request will generally be universal > Account Holders that do not provide the documentation may increase the FIs risk of non-compliance and causes an additional burden on the FI to document and follow up Compliance is an obligation of the Reporting FI whether or not a third party service provider has been engaged and therefore it is important to select the right service provider for you. 5 Don t engage a service provider without careful consideration > Talk with your service provider to ensure they have the expertise to support you > Be sure fees are transparent so you know what to expect > When more than one service provider is involved be sure fees are not overlapping > Be mindful that the service provider has or is given sufficient information and time to get the job done correctly 3

4 What s coming up on the calendar for 018? Cayman Portal reopens Notification deadline for first time Cayman FIs Deadline for filing for the 017 reporting period Early March 30 April May 018 The Cayman Department for International Tax Cooperation (DITC) recently advised industry participants of the following: CRS Guidance Notes AEOI Portal User Guide DITC The Official Advisory will be updated later in February 018 to include the new country lists and other changes regarding CRS including the release of a revised Entity Self- Certification form will be updated to reflect new functionality on the Cayman Portal including new processes for changing the Principal Point of Contact or Authorizing Person and for deactivating an FI on the Cayman Portal has published a new list of CRS Participating Jurisdictions and updated the Reportable Jurisdiction lists (both for 017 and 018) click here for the full lists and the Industry Advisory 4

5 Reportable jurisdiction update The below is the list of jurisdictions to be treated as Reportable Jurisdictions for the purposes of the Common Reporting Standard contained in Schedule 1 of those regulations. This notice supersedes the notice published by Extraordinary Gazette No. 49/017 dated Wednesday, 14 June 017. Azerbaijan and Pakistan will be Reportable Jurisdictions for reports due in 018 onwards and Kuwait has been removed as a Reportable Jurisdiction for reports due in 018 onwards. *For reports due in 017 onwards Argentina Greenland Mexico Belgium Guernsey Montserrat Bulgaria Hungary Netherlands Colombia Iceland Norway Croatia India Poland Cyprus Ireland Portugal Czech Republic Isle of Man Romania Denmark Italy San Marino Estonia Jersey Seychelles Faroe Islands Korea Slovak Republic Finland Latvia Slovenia France Liechtenstein South Africa Germany Lithuania Spain Gibraltar Luxembourg Sweden Greece Malta United Kingdom *Updated 3 January 018 Issued by: Tax Information Authority Department for International Tax Cooperation, Government Administration Building, Box Elgin Avenue, Grand Cayman KY1-9000, Cayman Islands 5

6 Reportable jurisdiction update *For reports due in 018 onwards in addition to the above Andorra Curaçao Pakistan Antigua and Barbuda Dominica Panama Aruba Ghana Russian Federation Australia Grenada Saint Kitts and Nevis Austria Hong Kong (China) Saint Lucia Azerbaijan Indonesia Saint Vincent and the Grenadines Barbados Israel Samoa Belize Japan Saudi Arabia Brazil Lebanon Singapore Brunei Darussalam Macau (China) Sint Maarten Canada Malaysia Switzerland Chile Mauritius Trinidad and Tobago China Monaco Turkey Cook Islands New Zealand Uruguay Costa Rica Niue Vanuatu *Updated 3 January 018 Issued by: Tax Information Authority Department for International Tax Cooperation, Government Administration Building, Box Elgin Avenue, Grand Cayman KY1-9000, Cayman Islands 6

7 How can Intertrust help? If you have any questions regarding the contents of this article don t hesitate to get in touch with your usual Intertrust relationship contact or one of our specialists listed below. Helen Dombowsky Senior Vice President Regulatory Services Intertrust Cayman tel helen.dombowsky@intertrustgroup.com Laura da Ascencao Vice President Intertrust Cayman tel laura.daascencao@intertrustgroup.com Intertrust Cayman 190 Elgin Avenue George Town Grand Cayman KY Cayman Islands tel fax cayman@intertrustgroup.com This document is provided by Intertrust for information purposes only and does not constitute an offer, invitation or inducement to contract. The information herein does not constitute legal, tax, regulatory, accounting or other professional advice and therefore one should seek appro priate professional advice before considering a transaction as described in this document. No liability is accepted whatsoever for any direct or consequential loss arising from the use of this document. The text of this disclaimer is not exhaustive, further details can be found at: Setting the standard since

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