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FATCA Related Deadlines for Cayman Islands Funds


1/5/15

Synopsis
 
Investment entities, such as hedge funds and private equity funds, organized in the Cayman Islands should be aware of upcoming deadlines related to the Foreign Account Tax Compliance Act (FATCA). Specifically, these entities should: (1) notify the Cayman Islands Tax Information Authority (TIA) of reporting obligations by March 31, 2015; and (2) report any Reportable Account to the TIA by May 31, 2015.

Issue
 
Background
On July 22, 2014, TIA issued Guidance Notes that set forth, among other things, the fundamental obligations of a Reporting Financial Institution (“Reporting FI”) in relation to: (1) registering with the IRS; (2) notifying the TIA of its reporting obligation; and (3) reporting financial accounts. Reporting FIs include all entities that would be considered a Foreign Financial Institution under United States FATCA regulations, including hedge funds, private equity funds, etc., organized in the Cayman Islands.
 
Recent and Upcoming Deadlines
By December 22, 2014, entities classified as a Reporting FI should have registered with the IRS and obtained a Global Intermediary Identification Number (GIIN) in order to avoid FATCA withholding. This deadline ensures sufficient time is allotted for the Reporting FI to be included on the published list of compliant entities not subject to FATCA withholding as of December 31, 2014. Registering with the IRS for FATCA purposes can be done online using the following link:

Entities that have already been assigned a GIIN should ensure they are on the published list of compliant entities by searching for their GIIN at the IRS’s website using the following link:

Cayman entities that are Reporting FIs and have not yet registered with the IRS should do so as soon as possible and obtain a GIIN, so their GIIN can be provided to withholding agents when required to avoid FATCA withholding.
 
By March 31, 2015, Reporting FIs must provide three pieces of information to the TIA: (i) the name of the FI, (ii) the categorization of the FI (i.e. investment entity) under the United States and Cayman Islands Intergovernmental Agreement, and (iii) the FI’s GIIN. Additionally, the full name, address, designation, and contact details of a natural person identified and authorized by the FI to be the principal point of contact for the FI must be provided. The Guidance Notes state the required notification will need to be submitted electronically, but, as of this Tax Alert, the TIA has not established any such electronic system.
 
By May 31, 2015, Reporting FIs must report to the TIA information regarding Reportable Accounts, which are accounts held by Specified U.S. Persons and accounts held by non-U.S. entities controlled by Specified U.S. Persons covering the prior calendar year.
 
What Does CohnReznick Think?
Reporting FIs organized in the Cayman Islands that have not registered with the IRS should do so as soon as possible and obtain a GIIN to minimize the risk of payments to them being subject to FATCA withholding. Reporting FIs organized in the Cayman Islands should be aware of the obligation to notify the TIA of their reporting obligations and look for upcoming guidance as to how to do so electronically. In the meantime, Reporting FIs should ensure sufficient processes are in place to identify Reportable Accounts in order to comply with the May 31, 2015 reporting deadline. This deadline, unlike the others, requires ongoing efforts that continuously identify Reportable accounts – as opposed to a one-time application.

Contact

For more information, please contact James Wall, principal, International Tax Practice, at 646-254-7460 or james.wall@cohnreznick.com.
 
To learn more about CohnReznick’s International Tax Practice, please visit our website.


Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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