The Cayman Islands Department for International Tax Cooperation (DITC) has advised that it has reopened the Cayman Islands AEOI Portal (AEOI Portal) for notification and reporting required under the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS). In addition the DITC has issued the following revised documentation:

AEOI Portal User Guide

CRS Guidance Notes

Entity Self-Certification form

This advisory provides a high-level summary of the practical implications of some of the key changes.

Upcoming Deadlines

Upcoming notification and reporting deadlines to be aware of:

  • 30 April 2018 for making the initial notification (i.e. enrolment) in respect of:
    • entities that became Cayman Financial Institutions (Cayman FIs) in 2017 but have not yet registered on the Portal; and
    • entities that became, or will become, Cayman FIs in 2018, up to 30 April 2018; and
  • 31 May 2018 for filing a report for the 2017 calendar year (or part calendar year, if the entity became a Cayman FI part-way through the year).

The notification deadline is only relevant to Cayman FIs that have not previously enrolled; the reporting deadline is relevant to all Cayman FIs.

New Portal Functionality Including Deactivation for Liquidated Cayman FIs

The AEOI Portal has new functionality that allows users to make Principal Point of Contact change requests, Authorising Person change requests and to make an FI deactivation request where a Cayman FI is being liquidated.

Final filings and deactivation requests may be made by third parties or service providers in respect of Cayman FIs that have already liquidated. This will come as welcome news for voluntary liquidators and others who have been awaiting the opening of the portal to complete the liquidation of a Cayman FI.

The AEOI Portal User Guide has been revised to reflect this functionality and in particular to provide details of the procedure for liquidating Cayman FIs to create and submit a FI deactivation request.

Corrective Filings

Cayman FIs needing to make corrective filings in respect of previously submitted returns for the 2016 calendar year i.e. filing an "Amended Return" for the purposes of FATCA or a "Corrected Return" for the purposes of CRS, will find the corresponding sections of the new AEOI Portal User Guide useful.

Revised CRS Guidance Notes – a New Controlling Persons Test

The most significant change to the CRS Guidance Notes relates to the test for determining the "Controlling Persons" of a passive non-financial institution (Passive NFE) that is a legal person. This is relevant for Cayman FIs because they are required to report on, inter alia, accounts held by a Passive NFE with one or more "Controlling Persons" that is a Reportable Person (as defined in the Cayman CRS Regulations).

The change means that with respect to the 2018 reporting year, a natural person who ultimately owns or controls, whether through direct or indirect ownership or control, 10% or more (previously it was 25% or more) of the shares or voting rights (New Threshold) in the Passive NFE will be deemed a Controlling Person. This brings the level in line with the 'beneficial owner' threshold contained in the new Cayman Anti-Money Laundering Regulations, 2017.

This will have an impact on any Cayman FIs that have account holders that are legal person Passive NFEs. Such Cayman FIs will need to identify any such Passive NFEs and ensure that, with respect to the 2018 reportable year, any Controlling Persons (as per the New Threshold) are identified and reported upon. In practical terms, it is likely that many onshore funds and other investment entities established in the United States or other Non-Participating Jurisdictions for the purposes of CRS, that are legal persons under the applicable laws, and that invest in Cayman FIs will be impacted by this change, to the extent they are Passive NFEs.

The government issued Entity Self-Certification Form has been updated to reflect the New Threshold and should be used by Cayman FIs going forward. In respect of existing accounts held by Passive NFEs whose direct or indirect natural person owners or controllers have not been classified previously as "Controlling Persons" due to the higher threshold, Cayman FIs have until 31 December 2018 to remediate the affected accounts. Cayman FIs will need to collect the new Entity Self-Certification Form from each pre-existing account holder that is a Passive NFE so that the Cayman FI can determine whether any additional "Controlling Person" based on the New Threshold, is a "Reportable Person" under the Cayman CRS Regulations. The Cayman FI will need to include such persons in their 2019 report.

Next Steps

Cayman FIs should consider whether they have any legal person Passive NFE account holders from whom they may need to obtain updated Controlling Person information. Cayman FIs with external service providers, such as administrators, undertaking their CRS due diligence should discuss this requirement with their service provider to ensure that it is being met.

Passive NFEs should be asked to re-assess who are their "Controlling Persons" and, where new Controlling Persons are identified based on the New Threshold, the new Controlling Persons will need to complete the applicable certifications and declarations in the relevant section of the New Entity Self-Certification Form so that this can be reported by the Cayman FI. If the assessment of Controlling Persons has not changed, no further action is required at this stage.

Cayman FIs should use the New Entity Self-Certification Form for all account holders of new accounts with immediate effect.