Cayman: Update in Respect of Automatic Exchange of Information (“AEOI”)

• Alignment of CRS and FATCA
  
  
• Ability to appoint entities as PPOCs and Authorising Persons
  
  
• Updated list of reportable jurisdictions

These amendments amend the Tax Information Authority (International Tax Compliance) (Common Reporting Standard) Regulations (“CRS Regulations”) and the Tax Information Authority (International Tax Compliance) (United States of America) Regulations (“FATCA Regulations”) respectively. On 25 February, the Tax Information Authority published a notice updating the list of jurisdictions to be treated as reportable for CRS purposes. This advisory provides a summary of the changes.

Alignment of CRS and FATCA

An entity classified as a “Financial Institution” under the CRS Regulations is required to appoint: (i) a “Principal Point of Contact” (“PPOC”) to engage on behalf of the Financial Institution with the Cayman Islands Tax Information Authority (“TIA”), and (ii) an “Authorising Person”, who can notify the TIA of changes to the PPOC.

However, an entity classified as a “Financial Institution” under the FATCA Regulations has hitherto been required to appoint a PPOC only. The FATCA Amendment aligns FATCA requirements with CRS requirements, so that now an entity classified as a “Financial Institution” under the FATCA Regulations is required to appoint an Authorising Person as well as a PPOC. There will be no material change for the vast majority of Financial Institutions in practice, as they will already have an Authorising Person for CRS purposes and will simply extend the terms of the appointment to cover FATCA also.

Ability to appoint entities as PPOCs and Authorising Persons

The amendments also now permit a PPOC and Authorising Person to each be a “person” as opposed to an “individual”. As a result, it is now possible for legal persons and legal arrangements, as well as natural persons, to be designated as the PPOC and Authorising Person pursuant to the CRS Regulations and the FATCA Regulations.

The Department for International Tax Cooperation (“DITC”) has subsequently issued Institutional User Guidance (“Guidance”) which expands on the amendments. The Guidance clarifies that the PPOC and Authorising Person may be the same person in circumstances where a Financial Institution elects to appoint an entity which is licenced by the Cayman Islands Monetary Authority (“CIMA”) as the PPOC and Authorising Person. For example, a service provider licenced by CIMA, such as Walkers Fiduciary Limited, will be permitted to act as both the PPOC and Authorising Person. It remains the case that where the PPOC or Authorising Person is an individual or an entity not licensed by CIMA the roles cannot be designated to the same “person”.

By way of recap, the DITC normally requires each Financial Institution to submit a Letter of Authorisation upon registration, or to complete a user change on the AEOI Portal. The DITC no longer requires a Letter of Authorisation to be submitted where a Financial Institution elects to have an entity licensed under the regulatory laws of CIMA act in the capacity of the PPOC and Authorising Person. The Letter of Authorisation is still required where the Financial Institution elects to have individuals or non-licensed entities act as PPOC and Authorising Person. There does not necessarily need to be any material change for Financial Institutions in practice, as existing PPOC and Authorising Person appointments of individuals continue to be permitted.

Extension of filing deadline for reports

The deadline for the filing of AEOI reports has been formally amended to 31 July of each year. Financial Institutions were previously required to file a report by 31 May each year.

Updated list of reportable jurisdictions

On 25 February, the Tax Information Authority published a notice updating the list of jurisdictions to be treated as Reportable Jurisdictions for the purposes of the Common Reporting Standard contained in Schedule 1 of those regulations for the purposes of the Tax Information Authority (International Tax Compliance) (Common Reporting Standard) Regulations. Further to the notice, Albania, Ecuador, Kazakhstan, Maldives, Nigeria, Oman, and Peru will be Reportable Jurisdictions for reports due in 2020 onwards.

Conclusion and contacts

Walkers has a dedicated global Regulatory & Risk Advisory practice group that can offer legal advice and guidance in connection with all aspects of AEOI compliance. Through its affiliate, Walkers Fiduciary Limited, Walkers can assist clients with customer due diligence, filing obligations and provide PPOCs and Authorising Persons for clients.