Country / Language

Cayman Islands to Begin Reporting Under CRS


12/22/2016
 
Synopsis 
 
The Common Reporting Standard (CRS) is a financial account information reporting regime developed by the Organisation for Economic Development (OECD) effective for fiscal year 2016 in so-called “early adopter” (EA) jurisdictions, including the Cayman Islands. As such, investment funds based in the Cayman Islands must notify the Cayman Islands’ Tax Information Authority (TIA) of their CRS reporting status by April 30, 2017, and report new and certain pre-existing financial accounts by May 31, 2017.
 
Background
 
In recent years, governments have begun active pursuit of offshore accounts held by tax residents. By entering into agreements with partner jurisdictions, governments are collecting and exchanging information regarding financial accountholders. In 2014, the United States implemented FATCA, a domestic law aimed at collecting financial account information of US citizens. The US implemented FATCA through Intergovernmental Agreements, and reporting began under FATCA in 2015. 
 
CRS is a financial account information reporting regime developed by the OECD, an international think-tank. CRS is not law, but rather a framework of regulations that member countries can adopt and implement. Currently, fifty-six (56) nations have adopted CRS, thereby agreeing to begin reporting financial accountholders in 2017 (collectively referred to as Early Adopter jurisdictions). An additional forty (40) nations have agreed to begin reporting in 2018.
 
The Cayman Islands, as an Early Adopter, will require Cayman based financial institutions (a broad definition including investment funds) to report financial accountholders by May 31, 2017. The TIA will then report these accounts to other Early Adopter jurisdictions. EA jurisdictions include: Anguilla, Argentina, Barbados, Belgium, Bermuda, British Virgin Islands, Bulgaria, Cayman Islands, Colombia, Croatia, Curaçao, Cyprus, Czech Republic, Denmark, , Estonia, Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Greenland, Guernsey, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mauritius, Mexico, Montserrat, Netherlands, Niue, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Trinidad and Tobago, Turks and Caicos Islands, and the United Kingdom. The remaining CRS adopters, including Hong Kong, will begin reporting accountholders in 2018.
 
What Does CohnReznick Think?
 
CRS will impact Cayman Island based investment funds in a meaningful way – as they are now obligated to notify the TIA as to their CRS reporting status, and report financial accountholders that are tax resident in EA jurisdictions. As such, funds based in the Cayman Islands will need to have identified financial accountholders that are tax resident in EA jurisdictions by year end 2016, and report such accounts to the TIA by May 31, 2017.
 
United States based investment funds will not be as greatly impacted by CRS because, while the United States is a member of the OECD, the US has not adopted CRS. Therefore, US based investment funds have no reporting obligations under CRS. However, US based investment funds will be expected to respond to requests by non-US counterparties to make certifications regarding their CRS status.
 
Contact
 
For more information, please contact James Wall, Principal, International Tax, at james.wall@cohnreznick.com or 646-254-7460 or Manpreet Sangha, Senior Tax Associate, at manpreet.sangha@cohnreznick.com or 646-762-3039.
 
 
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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