Cayman Islands AEOI update: March 2018

The Cayman Islands Department for International Tax Cooperation has re-opened its FATCA and CRS reporting portal and announced changes to its certification and notification forms, including introducing a lower threshold of 10% for the “Controlling Person” definition.

In an update dated 20 March 2018, the Cayman Islands Department for International Tax Cooperation (DITC) has announced that the Cayman Islands AEOI Portal for notification and reporting in relation to FATCA and CRS has been re-opened. Updated versions of the AEOI Portal User Guide and CRS Guidance Notes have also been published on 15 March 2018.

Entity self-certification forms and Controlling Persons

In addition, revised Entity Self-Certification forms have been made available. From 01 April 2018, Cayman Financial Institutions (CFIs) must use the revised Entity Self-Certification form rather than any previous versions. The definition of “Controlling Persons” for the purposes of CRS has been revised in the Entity Self-Certification form to reflect the new lower threshold for a Controlling Person under CRS, which is 10% direct or indirect ownership or control of the shares or the voting rights of an entity, being the threshold applied with effect from December 2017 by the Anti-Money Laundering Regulations 2017 which implement the FATF Recommendations in the Cayman Islands.

CFIs have until 31 December 2018 to obtain the new template self-certifications from any entity in respect of which they are required to identify the Controlling Persons so that they are in a position to report on Controlling Persons that are reportable persons under CRS in 2019 based on the 10% threshold. In particular, this remediation exercise will involve collecting the new template self-certification form from any entity that is a Passive Non-Financial Entity or a relevant financial institution in non-CRS participating jurisdiction:

  • upon opening any financial account for that entity if the financial account is opened on or after 01 February 2018, and
  • by 31 December 2018 for any financial account existing on 31 January 2018 if that entity is a legal person and was previously required to disclose its controlling persons to the CFI pursuant to the CRS.

Managers of Cayman funds should ensure that the revised entity forms are used from 1 April 2018 and that the required remediation steps are undertaken by the fund administrator or other service provider carrying out CRS due diligence obligations on behalf of the funds by 31 December 2018.

Managers of Cayman master feeder fund structures with US limited partnership feeder funds treated as Passive NFEs for CRS purposes should note that this lower 10% threshold will be relevant in identifying the Controlling Persons of the US limited partnership feeder fund for the purposes of the CRS self-certification forms provided to the Cayman master fund (and to any other Cayman financial institution in which the US limited partnership fund holds financial accounts) in connection with its CRS due diligence obligations.

It should be noted that the corresponding threshold for FATCA remains "more than 25%" unless clients adopt the definition of Substantial U.S. Owner from the US FATCA Treasury Regulations which applies a 10% threshold.

Other Cayman CRS developments

In terms of other developments:

  • the revised CRS Guidance Notes make it clear that financial accounts should be closed if self-certifications are not obtained within 90 days of new account opening, and
  • the revised AEOI Portal User Guide deals with how to correct CRS returns, a new procedure for changing AEOI Portal users, and how to deactivate an AEOI Portal account upon termination of a CFI (such deactivation could not previously be done via the AEOI Portal itself).

The relevant 2018 Cayman FATCA and CRS deadlines have been confirmed to be: (i) 30 April 2018 for initial notification, and (ii) 31 May 2018 for reporting for the 2017 calendar year. Cayman entities that did not compete the notification in 2017 because they became financial institutions after 30 April 2017 should fulfil the CRS notification obligation by 30 April 2018.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.