The Cayman Islands government just released new individual and entity self-certification forms, which were developed for purposes of compliance with U.S. FATCA, U.K. FATCA and the Common Reporting Standard (“CRS”).
Under U.S. FATCA and U.K. FATCA, Cayman funds are required to identify investors that are “specified U.S. persons” or “specified U.K. persons” and to report certain information with respect to those investors to the Cayman Islands Tax Information Authority (the “TIA”). Under CRS, which is effective beginning on January 1, 2016, Cayman funds are required to identify investors that are tax resident in jurisdictions which have chosen to participate in the CRS, and to report certain information with respect to those investors to the TIA. This information will ultimately be reported to the applicable participating countries.
New investors. Before January 1, 2016, Cayman funds should establish policies and maintain procedures designed to identify new reportable accounts. The new forms of self-certification may be used by Cayman funds to comply with their obligations under CRS. See below, however, regarding the 90 day grace period.
Notification. Before April 30, 2017, Cayman funds are required to notify the TIA of their status as a financial institution under CRS (even if the Cayman fund has already registered on the portal for purposes of U.S. FATCA).
Reporting. The first reporting deadline is May 31, 2017 (for the 2016 year). Reporting will be required by May 31st of each subsequent year. Nil returns (i.e., no reportable investors) are not required.
Due Diligence. Due diligence is required to be completed for pre-existing individual investors with account values of more than $1 million by December 31, 2016; due diligence with respect to all other pre-existing accounts must be completed by December 31, 2017. Practically, it may be easier to obtain new self-certifications from all investors at the same time.
WHAT TO DO NOW:
The new forms of self-certification (which may be modified, for example, to be made more “user friendly”) should replace the U.K. FATCA self-certification forms currently being used by offshore funds in their subscription agreements
Although this should technically be done prior to the January 1, 2016, deadline, the advisory issued by the Cayman Islands provides that, where a “day one” certification is not available it should be obtained as quickly as possible and in any event, no later than 90 days after the investor has subscribed. Where a CRS self-certification has not been obtained within 90 days of subscription (by March 30, 2016 for new investors investing on January 1, 2016), the fund must treat the investor as undocumented and report the account.
Additionally, funds should review their PPMs to ensure that CRS is adequately addressed. Finally, if a fund is relying on its administrator (or other service provider) as part of its FATCA compliance plan, it should determine whether CRS compliance is covered under existing contracts or agreements with its administrator (or other service provider).
On December 10, 2015, Phil Gross and Neil Dubnoff participated in a webinar providing a more detailed discussion of CRS and what to do now.
The presentation can be found here – “Common Reporting Standard – Game Plan for Compliance“