FATCA Guidance Notes Updated - Cayman Islands

The Cayman Tax Information Authority (“TIA”) has issued an updated version of the FATCA Guidance Notes.​

The updated Guidance Notes (available here) replace the previous version issued on 22 July 2014 and provide additional commentary and clarification on a number of areas, including: 

• what “managed by” means in the context of an investment entity;
• the operation of the Investment Adviser and Investment Manager exemption; 
• a new category of Passive NFFE known as the "Direct Reporting NFFE";
• the interpretation of the term "controlling person" in relation to Passive NFFEs; 
• the registration and reporting obligations of an entity which is dormant or has commenced liquidation, or entered into liquidation prior to 30 June 2014.

IRS Registration

Under Cayman Islands law, all Cayman Islands Reporting Financial Institutions are required to register with the US Internal Revenue Service (through the IRS online registration portal) to obtain a Global Intermediary Identification Number before 31 December 2014, whether or not such Financial Institution has US investors or received US source income.  Failure to register in time will result in a 30% withholding tax being imposed on any US source income and also possible fines under Cayman Islands law. 

Reporting obligations

It should be noted that Cayman Islands Reporting Financial Institutions will need to commence filing reports to the TIA in respect of its relevant US investors from May 2015 onwards. However, prior to that, a Financial Institution which has reporting obligations under Cayman law must notify the TIA of that fact and must provide:

• the name of the Financial Institution;
• the categorization of the Financial Institution as determined in accordance with the IGA; and
• where the Financial Institution has registered with the IRS for the purposes of the Agreement in accordance with regulation 4, the Global Intermediary Identification Number allocated to that Financial Institution

As it stands, such notification must be provided no later than 31st March 2015 but there are proposals to extend that date to 30 April.  An industry advisory is expected following Cabinet’s consideration of that proposal.