Cayman releases V2 FATCA Guidance Notes
(CNS Business): Just days away from the 22 December deadline for many financial institutions to register with the US tax authorities to obtain their Global Intermediary Identification Number (GIIN) by 1 January 2015, the Cayman Islands Tax Information Authority has issued Version 2 of the FATCA Guidance Notes, which clarified some of the issues raised by the industry following the release of the first draft version in May.
The US Foreign Account Tax Compliance Act (FATCA) targets non-compliance by US taxpayers using foreign accounts and requires financial institutions outside the US to supply the IRS with information about financial accounts held by US taxpayers.
The new Guidance Notes (see below) are intended to support the implementation of the regulations and legislation necessary to implement the intergovernmental agreements (IGAs) that the Cayman Islands has signed with both the United States and United Kingdom to comply with FATCA and the UK’s tax information sharing law.
Version 2 has fixed some of the anomalies in the first version, according to Dawn Howe, Partner at Walkers’ Cayman office.
“Local service providers providing registered office, company secretarial or non-executive independent director type services, and Cayman entities engaging local service providers for the same, will be pleased that the Guidance Notes clarify that neither party will generally be treated as a Financial Institution as a result of supplying or utilising these types of administrative services – with all the reporting and compliance headaches that would go along with that,” Howe noted.
The new Guidance Notes have also clarified that any investment entity in liquidation prior to 30 June 2014 will not need to register or report at all. Investment entities that close or enter into liquidation post 30 June 2014 will just have to make a single final return and then all further ongoing reporting obligations will fall away.
“This is very helpful as it means that funds that are still stuck in the midst of protracted winding up procedures following the financial crisis know they do not need to go through the hassle of registering to comply with FATCA and implementing a full FATCA compliance programme,” she said, noting that Version 2 also included certain useful additional guidance on the treatment of inter-affiliate holding companies and treasury centres.
Howe stressed that in order to remain compliant with Cayman law, all Cayman Islands entities that qualify as a Reporting Financial Institutions must apply for a GIIN by no later than Monday 22 December 2014.
“It’s fair to say that most Cayman Financial Institutions are ready,” she said. “The local industry has done a fantastic job of informing and educating people. A number of service providers, for example DMS Offshore, have been really instrumental in reaching out to Cayman institutions operating outside of the Cayman Islands and spreading the FATCA message in some fairly innovative and eye-catching ways. Local service providers generally, both legal and administrative, have also been issuing bulletins to get the industry up to speed and to encourage clients to embrace the new laws.”
A reflection of the success of this effort was revealed in an analysis of global registrations with the IRS for GIINs in late summer, where Cayman Islands institutions accounted for almost 20% of all those registered at that time.
“This shows how well we’ve done as a jurisdiction,” Howe noted.
The Ministry of Financial Services has also announced it is currently making proposals for Cabinet approval for further amendments and said an industry advisory would be issued following Cabinet’s consideration.
The final FATCA Guidance Notes v2.0 are located here.