As clients will be aware, the Cayman Islands and the British Virgin Islands ("BVI") have legislation in place which brought the OECD's Common Reporting Standard ("CRS") into law with effect from 1 January 2016. Clients with entities operating in either the Cayman Islands or BVI and which constitute Reporting Financial Institutions ("RFIs") for CRS purposes should note the following:
Any RFI which had preexisting accounts as at 31 December 2015 is under an obligation to conduct due diligence on those preexisting accounts. The deadline for Preexisting High Value Individual Accounts was 31 December 2016. The deadline for all other accounts, i.e. Preexisting Lower Value Individual Accounts and Preexisting Entity Accounts, is 31 December 2017. For the purposes of this deadline, a Preexisting Lower Value Individual Account is one that had a balance or value that does not exceed US$1 million as of 31 December 2015, and a Preexisting Entity Account is one that had a balance or value that exceeded US$250,000 as of either 31 December 2015 or 31 December 2016.
A direct consequence of the preexisting account deadline is that all accounts maintained by an RFI will potentially be reportable in 2018. Whether an account is reportable or not will depend upon whether the account holder is resident in a reportable jurisdiction but otherwise all due diligence to determine tax residency should have been completed.
Cayman Islands and BVI AEOI Portals
The portal maintained by the Cayman Islands Department for International Tax Cooperation remains offline following its closure in September 2017 for the gathering up of information and exchange with third country tax authorities pursuant to the OECD information exchange mechanism. The portal maintained by the BVI International Tax Authority also remains offline following closure for similar reasons. We will update clients when we have further information on the portals reopening.
Cayman Islands DITC Registrations
Many clients effected defensive GIIN registrations with the IRS and with the DITC for FATCA purposes at a time when the scope of FATCA was unclear. With the benefit of guidance and experience, a number of clients have sought to effect de-registrations having concluded that the relevant entities are in fact non-financial foreign entities (NFFEs). For those clients that submitted de-registration applications to the DITC in the months running up to the reporting deadline, it should be noted that the DITC is now processing and effecting those de-registrations. The DITC asks that if a client submitted a de-registration request prior to 13 September 2017 and has not yet received a response that they should resend the request to the DITC. Other clients with RFIs are reminded that registration with the DITC is required for both FATCA and CRS and that a registration with the IRS for a GIIN is not sufficient for Cayman DITC purposes. In addition, Cayman Islands Non-Reporting Financial Institutions are also required to register with the Cayman DITC declaring the exemption on which they rely.
Although no enforcement actions have been taken yet by the Cayman DITC or the BVI ITA, clients should remain aware that, because CRS is a reporting regime without a withholding tax (unlike FATCA), compliance enforcement is largely expected to occur via inspections from the authorities. Cayman clients are reminded that written policies and procedures are required for all Cayman RFIs although the nature and scope of that document will vary depending upon the delegation arrangements that may be in place.