January 2015
Tax alert
Cayman Islands
FATCA tax alert
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On 4 July 2014, the Cayman Islands Government advised that the “Tax Information Authority
(International Tax Compliance) (United States of America) Regulations, 2014” (US
Regulations) and “Tax Information Authority (International Tax Compliance) (United Kingdom)
Regulations, 2014” (UK Regulations) had been put into effect.
US Regulations – http://www.gazettes.gov.ky/sites/default/files/extraordinary-gazettessupplements/Es432014_web.pdf
UK Regulations – http://www.gazettes.gov.ky/sites/default/files/extraordinary-gazettessupplements/Es442014_web.pdf
Subsequently, on 22 July 2014, the Cayman Islands Government distributed final guidance
notes on the implementation of the Foreign Account Tax Compliance Act (FATCA) in the
Cayman Islands in accordance with the terms of an Intergovernmental Agreement (IGA) that
the Cayman Islands entered into with the United Kingdom on 5 November 2013 (UK Agreement)
and the United States on 29 November 2013 (US Agreement). The guidance notes were
subsequently updated, and a version 2.0 was issued on 15 December 2014. These are available
for review on the Cayman Islands Tax Information Authority website.
http://tia.gov.ky/pdf/FATCA_Guidance_Notes.pdf
Provided Cayman Islands Financial Institutions (including subsidiaries and branches of nonresident Financial Institutions that are located in the Cayman Islands) comply with these
regulations, when effective, they will not be subject to FATCA withholding tax under the US
Internal Revenue Code.
A summary of the main points of interest in the Cayman Islands regulations and guidance
notes and EY observations are detailed below. This includes many provisions set out in the IGA
that are incorporated into the regulations. This summary is not meant to be a substitute for
the actual guidance notes or the regulations.
.
A. Cayman Islands “Tax
Information Authority
(International Tax Compliance)
(United States of America)
Regulations, 2014“
Key issues:
FI’s ability to use alternative definitions
under Treasury Regulations or OECD CRS
Sections 2.(2)(a) and 2.(2)(b) of the US regulations
state that a word or expression defined in the US
Agreement has the meaning in that Agreement
except to the extent that a Financial Institution (FI)
may use an alternative definition provided in either
the US Treasury Regulations or the Common
Reporting Standard (CRS) for the Automatic
Exchange of Financial Account Information published
by the Organisation for Economic Co-operation and
Development (OECD).
EY observation
Cayman FIs may use an alternate definition under the US
Regulations or OECD CRS, as long as the use of such
definition would not “frustrate the purposes of the
Agreement.” Determination of such allowable use will
take into account any guidance issued or approved by
the Cayman Islands Tax Information Authority (TIA).
Pre-Existing Entity Account identification
date
Section 5.(5)(f) states that a New Entity Account is a
financial account opened after 30 June 2014, except
insofar as a Reporting FI has elected to substitute a
date no later than 31 December 2014 for the 30 June
2014 date.
Pre-Existing account holder opens a new
account
Section 7(2) provides that if an institution obtains, or is
in the process of obtaining, evidence of a person’s US
status in relation to any Pre-Existing Account, it may rely
on the evidence in relation to any new account unless it
has reasonable cause to believe that the person’s US
status has subsequently changed.
Registration
An application for registration shall be made by a
Reporting Financial Institution or Registered DeemedCompliant Financial Institution as soon as possible but
prior to 31 December 2014 or, if the institution has not
commenced to carry on a business on that date, not later
than 30 days following the date of commencement of
that business.
Information returns
Submission of informational returns of US reportable
accounts and payments to non-participating FIs for the
2014 US tax year will be due to the TIA by 31 May 2015. Due
date for UK reporting is 31 May 2016.
US reportable accounts
For all US reportable accounts maintained by the
institution in that year, the returns must include:
For 2014 tax year and every following calendar year:
Name, registered address and Global Intermediary
Identification Number (GIIN) of the financial institution
filing the return
 A statement of whether paragraph five of Article 4 of
the Agreement (Special Rules Regarding Related
Entities and Branches that are Non-participating
Financial Institutions) applies and, if it does, whether
the requirements have been met
 Name, address and US tax identification number or
date of birth, as appropriate, of each account holder
that is a US person or of a passive entity and its
controlling US person(s), where this arises; also
required for each:
 Account number (or its functional equivalent)
 Account balance or value at end of the tax year
or, if an account was closed during the year, the
highest balance or value of the account on the
date the Reporting FI closed the account

Additional details to be required, beginning the tax
year 2015:


For custodial accounts, the total gross amount of
interest, dividends and other income arising from
assets held in the account
For depository accounts, the total gross amount of
interest paid/credited
2

For all other accounts, the total gross amount paid or
credited to the account holder where the institution is
the obligor or debtor, including the aggregate amount
of redemption payments
Additional details to be required, beginning with the 2017
tax year:

For custodial accounts, the gross proceeds from
sales/redemptions associated with the account
where the institution acted as custodian, broker,
nominee or agent
Payments to Non-Participating Financial
Institutions (NPFIs)
A Reporting Financial Institution shall establish and
maintain arrangements designed to identify payments
made to an NPFI in either the calendar year 2015 or 2016.
A Reporting Financial Institution shall in respect of each of
the calendar years 2015 and 2016 prepare a return
detailing the names of the NPFIs to whom payments have
been identified in accordance with regulation 10(1) as
having been made in the year in question and the
total amount of payments made to each of the NPFIs
in question.
If, for a calendar year, no payments are identified,
the Reporting Financial Institution shall prepare a
return for the calendar year stating that fact.
Due dates for Cayman Islands Financial
Institutions
Notification to the Competent Authority
An FI which has reporting obligations under the regulations
shall notify the Competent Authority of that fact and shall
provide by 31 March in the first calendar year in which it is
required to comply, the following:



The name of the FI
Categorization of the FI as determined in accordance
with the Agreement
Where the FI has registered with the Internal Revenue
Service (IRS) of the US for purposes of the US
Agreement with regulation 4, the GIIN assigned to
that FI by the IRS
In conjunction with the release of the updated Cayman
Islands FATCA Guidance Notes, the Cayman Islands
Government also indicated that “the Ministry currently is
making proposals for Cabinet approval to amend the
notification due date prescribed in Regulations 10(3)
and 14(3) of the UK and US Regulations, respectively,
from 31 March to 30 April. An industry advisory will be
issued following Cabinet’s consideration.”
Filing date of informational return to the
Cayman Islands TIA
An FI shall send a return to the Competent Authority on or
before 31 May of the year following the calendar year to
which the return relates, in the form the Competent
Authority requires.
The required form for electronic reporting will be made
available on the Cayman Islands TIA website in early 2015.
The reporting format will be consistent with currently
published schemas by the US IRS for FATCA and the OECD
for CRS.
Nil returns
Under US Regulations if, during the calendar year in
question, the Reporting Financial Institution
maintains no reportable accounts it must submit a
return stating that fact (i.e., nil return).
Enforcement and penalties
The Regulations (both US and UK) detail anti-avoidance
measures directed at arrangements put in place by any
person to avoid the obligations required by the
Regulations. These anti-avoidance provisions mirror
existing penalty provisions found under Exchange of
Information Laws in the Cayman Islands, for example, the
Reporting of Savings Income Information (European
Union) Law enacted in 2005.
Specific details on the penalties related to non-compliance
can be found in the Cayman Islands TIA Regulations
enacted for both the US and UK Agreements.
Third-party appointment
Third parties may be appointed as agents to carry out the
duties and obligations imposed by these regulations.
However, the FI must have access to all records and
documentary evidence used to identify and report on
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reportable accounts and remains responsible for carrying
out its obligations. The FI is responsible for any failure of a
third party to carry out its obligations, notwithstanding
that the actions were the actions of the third party or that
the failure to act was the failure by that third party to act.
Information returns initial due date
Arrangements to obtain the US TIN of every specified US
person on a reportable account are required for all new
accounts opened from 1 July 2014 (except for New Entity
Accounts insofar as a Reporting FI has elected to
substitute a date no later than 31 December 2014 for the
30 June 2014 date) and all Pre-Existing Accounts from
1 July 2017.
Registration
EY observation
It would seem most efficient for FIs to request the US TIN,
where relevant, from holders of new accounts in the same
document/process via receipt of a completed Form W9 or
as the core self-certification question itself (see further
comments below).
Submission of informational returns of UK reportable
accounts for the 2014 and 2015 tax years will be due to the
TIA as of 31 May 2016.
Currently, there is no required registration for FIs
with Her Majesty’s Revenue and Customs (HMRC)
under the UK Regulations and, thus, no UK equivalent
to the US GIIN.
Pre-Existing Accounts
For individual or entity accounts, any reference to a
Pre-Existing Account is to a financial account
maintained on 30 June 2014. Any account opened
after that date is considered a new account for
UK Regulations.
Nil returns
B. Cayman Islands “Tax
Information Authority
(International Tax Compliance)
(United Kingdom) Regulations,
2014“
Much of the UK Regulations in general are similar to
the US Regulations previously discussed in item A,
though obviously some terms and references will
differ between these jurisdictions. Key differences
between the US and UK Regulations will be discussed
in more detail under item C (Cayman Islands IGA
guidance notes section) of this alert.
It is advised that the UK Regulations be reviewed in
order to understand those requirements, though we
will highlight some of the key issues here.
Account holder identification
Under UK Regulations, the account holder’s UK tax
status and residency status is important for the due
diligence and identification process, not citizenship or
place of incorporation as with the US Regulations.
Under the UK Regulations if, during the calendar
year in question, the Reporting Financial Institution
maintains no reportable accounts it must submit a
return stating that fact (i.e., nil return).
C. Cayman Islands IGA guidance
notes (22 July 2014)
The Cayman Islands guidance notes cover both the US and
UK regulations throughout the document, as well as OECD
CRS definitions where applicable. This comprehensive
approach should be beneficial for all institutions in
understanding their compliance requirements for the
various information reporting regimes.
It should be noted that to best serve the Cayman Islands
institutions, the Cayman Islands guidance notes will
be updated periodically to address any issues or
terms that need additional clarity or definition.
Comments from industry may be communicated to
the Cayman Islands Government through the
appropriate channels.
Chapter 1: Background
The Cayman Islands entered into IGAs with the US and UK
in 2013 which, throughout this alert, will be referred to as
the “US Agreement” and “UK Agreement” as applicable.
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The Cayman Islands Competent Authority
The Cayman Islands Competent Authority is the TIA. The
functions of the TIA are carried out by the Director and
staff of the Department for International Tax
Cooperation (DITC).
5)
Individual and collective portfolio management
6)
Otherwise investing, administering or managing
funds or money on behalf of other persons – this
category includes collective investment funds,
fund administrators, fund managers, fund
distributors and custodians. The updated
guidance notes (version 2) have provided
additional clarity on the “managed by” test
and between “managing” and “administering”
by entities
The TIA will receive the information required to be
disclosed under the Agreements and transmit that
information to the IRS in respect of the US Agreement and
HMRC in respect to the UK Agreement.
(Note that reporting obligations only exist if
financial accounts are held with the institution
and so duplicative reporting on the same
financial accounts is not intended to arise. It
should also be noted that the CRS definition of
Investment Entity differs from the Agreements
definition. However, the CRS definition is
substantially similar to the US Regulations
definition. Entities have a choice of which
definition to apply.)
The TIA does not have responsibility for the audit of the
information provided by the FIs. The TIA will monitor
compliance by the FIs with domestic legal requirements
and, as necessary, will enforce applicable Cayman Islands
Laws and Regulations, including cases of significant
non-compliance reported by the US or UK
Competent Authorities.
Specified Persons
Reference to Specified Person (defined in the US and UK
Agreements) in these guidance notes relates to either a
Specified US Person or Specified UK Person, as the
context requires. Where a different treatment applies,
these guidance notes will state Specified US Person or
Specified UK Person.
7)
Specified Insurance Companies, including
insurance companies and their holding companies
when the insurance company writes products
which are cash value or annuity contracts
8)
A Captive Insurance Company that does not issue
cash value insurance contracts or annuity
contracts would, in most instances, not be
categorized as an FI and would thus be deemed a
Non-Financial Foreign Entity (NFFE). The
updated guidance notes (Version 2) in section
2.11.1 have clarified the requirements where a
Cayman captive insurance company, having
made a US IRC section 953(d) election, would
be treated as a US entity and not a Cayman
entity for FATCA purposes.
9)
The updated guidance notes have added a
“Nominee Companies” section (2.12),
defining the requirements to be
considered disregarded.
Chapter 2: Financial Institutions affected by
FATCA
What constitutes a financial institution?



Custodial institutions will include brokers, custodial
banks, trust companies and clearing organizations.
Depository institutions will include banks, credit
unions, industrial and provident societies and building
societies, etc.
Investment entities, as defined in the Agreements,
include any Entity that conducts as a business, or is
managed by an Entity that conducts as a business,
one or more of the following activities for or on behalf
of customers:
1)
Trading in money market instruments
2)
Foreign exchange
3)
Interest rate and index instruments
4)
Transferable securities and commodity
futures trading
10) Subsidiaries and branches of a non-Cayman
Islands entity (including a US Entity) carrying on
a business as a Custodial Institution, Depository
Institution, an Investment Entity, or Specified
Insurance Company in the Cayman Islands
will be a Reporting Cayman Islands
Financial Institution.
5
What constitutes a Cayman Islands Financial
Institution?
A Cayman Islands Financial Institution is any financial
institution organized under the laws of, or resident in the
Cayman Islands.



For a company, if the company is incorporated in the
Cayman Islands
For trusts, if any of the trustees are incorporated,
registered or licensed in the Cayman Islands
(section 6)
For partnerships, if the partnership is established in
the Cayman Islands
Related Entities and Expanded Affiliated
Groups
Under the US Agreement, an Entity is a related Entity of
another Entity if either Entity controls the other Entity, or
the two Entities are under common control. Control for
this purpose includes direct or indirect ownership of more
than 50% of the “vote or value” in an Entity.
The definition of “control” and “expanded affiliated group”
under the US Regulations may be used by an FI instead.
Under the US Regulations, the definition of control
includes “direct or indirect ownership of more than 50% of
the vote and value” in an Entity.
EY observation
To avoid potentially onerous identification, reporting and
registration burdens resulting from being part of an
Expanded Affiliated Group, an Entity may wish to use the
US Regulations definition of “control” as the potential of
meeting both vote and value tests is less likely.
Chapters 3 and 4: Non-Reporting Financial
Institutions (US Agreement) and Non-Reporting
Financial Institutions (UK Agreement)
US Agreement – Exempted Financial
Institutions
Certified Deemed Compliant Financial
Institutions (Annex II of the IGA)
Expanded definitions and categories of Certified Deemed
Compliant Financial Institutions (CDCFIs) are provided
and include: (1) FIs with a local client base (required to be
assessed annually via implemented policies and
procedures), (2) certain collective investment vehicles,
(3) local banks, (4) FIs with only low value accounts,
(5) qualified credit card issuers, (6) sponsored closely
held investment vehicles, (7) trustee-documented trusts,
(8) sponsored investment entities and controlled foreign
corporations, (9) limited life debt investment entities,
(10) investment advisors, and (11) investment managers.
The updated guidance notes have given more clarity
around the investment advisor (IA) and investment
manager (IM) definition, also giving an example of a
general partner to a limited partnership. Each IM or IA
should still determine its FATCA classification based on its
specific duties and services provided per the regulations.
The updated guidance notes have also added an
additional type of CDCFI – “Excepted inter-affiliate FFI” –
which is detailed in the new section 3.3.11.
A Cayman Islands FI that qualifies as one of the CDC
categories above will not need to register to obtain a
GIIN, save in limited circumstances detailed in section
3.3. It will need to certify its status by providing
documentation regarding its owners to withholding
agents where relevant.
Registered Deemed Compliant Financial
Institutions
Cayman Islands FIs may also benefit from categories of
Registered Deemed Compliant Financial Institutions under
the US Regulations which include: (1) a non-reporting
member of a group of related participating FIs, (2) a
restricted fund, and (3) a qualified collective
investment vehicle.
A Cayman Islands FI that qualifies as one of the Registered
Deemed Compliant categories above would need to
register with the IRS to obtain a GIIN, or be registered by
another Entity. Such an FI will not need to report, but
details of Financial Accounts maintained by the FI may be
reported by another entity.
EY observation
In order to benefit from certain exemptions, the guidance
notes state that FIs must implement policies and
procedures to monitor that these conditions are
continuously being met.
UK Agreement – Exempted Financial
Institutions
Expanded definitions and categories of small or limited
scope FIs qualifying as Non-Reporting Cayman Islands
Financial Institutions include: (1) local credit unions,
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(2) FIs with only low value accounts, and (3) qualified
credit card issuers.
Investment entities that qualify as Non-Reporting
Cayman Islands Financial Institutions include: (1) TrusteeDocumented Trusts, (2) Sponsored investment entities
(3) Sponsored closely held investment vehicles,
(4) Investment advisors and investment managers,
and (5) Collective investment vehicles.
This section also details special rules for reporting
interests of investment entities in collective investment
vehicles which, if the qualifications are met, may allow for
the reporting obligations of the Investment Entity with
respect to those interests to be met.
EY observation
The UK Agreement differs in many aspects from the US
Agreement; thus, those institutions with reporting
requirements to both the US and the UK should review
the guidance notes in order to comply appropriately
with each.
Chapter 5: Exempt beneficial owners
What types of entities and products qualify
for this status?
Entities regarded as Exempt Beneficial Owners are NonReporting Financial Institutions.
Entities and products that qualify as Exempt Beneficial
Owners include (1) government entities that, for the
Cayman Islands, include the Cayman Islands Monetary
Authority, (2) retirement/pension funds that, for the
Cayman Islands, includes (a) Broad and Narrow
Participation Retirement funds meeting the criteria in
Annex II of the Agreements (under which “subject to
government regulation” means they are registered with
the Cayman Islands National Pensions Office) and
(b) Pension Funds managed and administered by the
Public Service Pensions Board.
solely in their capacity as a Controlling Person of that
charity, therefore removing the requirement to “look
through” the charity to the Controlling Persons. Thus, the
UK and US Agreements are now similar in this treatment.
Chapter 6: Trusts
How are Cayman Islands Resident Trusts
viewed for the US and UK Agreements, and
what are the general reporting and
registration requirements?
This section applies to all Cayman Islands Resident Trusts.
A trust is resident in the Cayman Islands, for purposes of
the Agreement, if it has a trustee that is a trust corporation
which is incorporated, registered or licensed in the Cayman
Islands. A Cayman Islands Resident Trust thus may be
established under Cayman Islands law or the law of
another jurisdiction. The updated guidance notes add the
following language to the definition above prior to the last
sentence – “or, in the case of an individual trustee, the
person is resident in the Cayman Islands.”
Multi-jurisdictional trustees may be involved, thus for a
Cayman Islands Resident Trust the Reporting Cayman
Islands Financial Institution/Cayman Islands resident
trustee must undertake the reporting obligations where
required, unless it has actual knowledge that another FI
has reported the required information (regardless of
whether that FI is a Cayman Islands Financial Institution or
not). “Actual knowledge” is defined as holding written
confirmation from the trustee in the other jurisdiction that
the trust has been reported for the US or UK Agreement.
Reporting obligations under the Agreements only apply to
Cayman Islands Resident Trusts where any of the
following persons fall within the definition of Controlling
Persons under section 9.7, and are identified as Specified
Persons as defined under section 1.7:



Exempt beneficial owners do not need to register with
the IRS for a GIIN.
Due to an addition made to Annex II in the UK
Agreement for “Limited Capacity Exempt Beneficial
Owners,” the updated guidance notes added a new
section 5.4, detailing that the Controlling Persons of a
charity shall be treated as Exempt Beneficial Owners


Settlor
Beneficiary or class of beneficiary
Trustee
Protector
Any other natural person exercising ultimate
effective control over the trust
Alternatively, persons described under the definition of
“equity interest” in the US Regulations may be used.
7
If any of the above is identified as a Specified Person,
then information related to the trust may need to be
reported. How this information is reported, and by whom,
depends on whether the trust is an FI or Non-Financial
Foreign Entity.
Financial Institution, or (5) a Participating Foreign
Financial Institution.
2)
The trustee agrees to report all the information
required to be reported with respect to the trust.
If none of the above is identified as a Specified Person,
then no further reporting is required with respect to the
trust.
In this situation, the trust will not be required to
register under the US Agreement, since the trustee will
register by virtue of being an FI.
Trusts are categorized for purposes of the Agreements as
Investment Entities, FIs or Non-Financial Foreign Entities
(NFFEs). The guidance notes in section 6.4 give a very
good overview of the categories and provide examples of
trust scenarios. The updated guidance notes add a
paragraph to section 6.4, which says that a trust could
meet any of the FI definitions, depending on the nature of
its activities and the assets held. A trust is expected to be
treated as an FI most commonly where it meets the
definition of an Investment Entity. Section 6.4 sets out
how a trust would be treated if it was an Investment Entity
or an NFFE and not in regard to trusts that might be any
other type of FI.
EY observation
It is expected that for most Cayman Islands Resident
Trusts, there will be a trustee who will meet the
requirements of condition 1 above and take on the
reporting obligations as needed to qualify the trust
under the Trustee Documented Trust scenario.
Reporting and registration for trusts has various options.
A trust that is an Investment Entity may be able to use
one of four categories of FIs to simplify the process. These
are as follows:
1)
2)
3)
4)
Trustee-Documented Trust
Sponsored Investment Entity
Owner-Documented Financial Institution (section 3.4)
Sponsored, closely held investment vehicle
(section 4.3.3)
Sponsored Investment Entity
US Agreement
A trust that is an Investment Entity may appoint a
Sponsor to take on its due diligence, registration and
reporting obligations, although this is not permitted for
trusts that are withholding foreign trusts under the
US regulations.
If a Sponsoring Entity is appointed, there is no
requirement for the trust to be registered, unless it has
a US Reportable Account. If such an account is
identified, the Sponsoring Entity must register the trust
on or before the later of 31 December 2015 or 90 days
after the reportable account is identified.
UK Agreement
For each of these, the trust will be a Non-Reporting
Financial Institution.
If none of these apply, and the trust is not an NFFE, the
trust will be a Reporting Financial Institution and will need
to register/report as applicable.
Trustee-Documented Trusts (TDT)
A trust may be treated as a TDT, if both of the following
conditions are met:
1)
A trustee of the trust is any of the following: (1) a
Reporting US Financial Institution, (2) a Reporting UK
Financial Institution, (3) a Reporting Cayman Islands
Financial Institution, (4) a Reporting Model 1
A Cayman Islands Resident Trust that is an
Investment Entity may only appoint a Cayman Islands
Sponsoring Entity to take on its due diligence and
reporting obligations.
The Cayman Islands Sponsoring Entity must identify
the trust in the reporting completed on behalf of the
trust and notify the TIA of its status as the Sponsor.
EY observation
It should be noted that the US Agreement allows for
any institution, regardless of jurisdiction, to be
appointed as a Sponsoring Entity for an entity in any
other jurisdiction. However, the UK Agreement
limits the jurisdiction of the Sponsoring Entity to
8
being in the same jurisdiction as the Sponsored
Entity (i.e., a Cayman Islands entity can only be a
Sponsoring Entity for another Cayman
Islands entity).
The updated guidance notes added a new section
covering Private Trust Companies (section 6.14)
to give clarity to these institutions for
FATCA compliance.
In addition, the updated guidance notes in section
6.15 bring the US and UK Agreements in line for
purposes of viewing charitable trusts as Active
NFFEs, though the UK requirements for this status,
as detailed, must be met.
are not in the chain of legal ownership of a CIV will
not be regarded as an FI in respect of any accounts
on which they advise.
Reporting can be done through a Sponsored
Investment Entity Financial Institution. In addition,
a CIV may delegate obligations to a third-party
service provider, though ultimately the responsibility
will remain with the CIV as the Reporting
Financial Institution.
Section 7.6 details Deemed Compliant Collective
Investment Vehicles. Of specific note is the Qualified
Collective Investment Vehicle (QCIV) status for which
an Investment Entity could qualify to be treated as a
Registered Deemed Compliant Financial Institution.
Chapter 7: Collective investment vehicles
Generally, a Collective Investment Vehicle (CIV)
includes any Entity that is defined under the Cayman
Islands Mutual Funds Law (2013), as amended and
revised. Any Entity treated as a CIV will be an
Investment Entity and, thus, an FI.
As applicable to fund entities, Investment Entities
may include: (1) CIVs, detailed above, (2) fund
managers, (3) investment managers, (4) fund
administrators, (5) transfer agents, and
(6) depositories and trustees of unit trusts.
A Cayman Islands FI that qualifies for Registered Deemed
Compliant FI status would need to register with the IRS to
obtain a GIIN, or be registered by another Entity. Such an
FI will not need to report, but details of Financial Accounts
maintained by the FI may be reported by another entity.
To qualify as a QCIV, the Investment Entity must
meet all of the following requirements:

The QCIV must be an Investment Entity and must
be regulated as an Investment Entity in the
Cayman Islands and every country it operates
in. If the manager is regulated with respect to
the CIV in all countries in which the CIV is
registered, then the fund is considered to
be regulated.

The QCIV’s investors are limited to equity
investors, direct debt investors with greater than
US$50,000, Participating Foreign Financial
Institutions, Registered Deemed Compliant
Foreign Financial Institutions, retirement funds
classified as Exempt Beneficial Owners, US
Persons that are not Specified US Persons, NonReporting IGA Foreign Financial Institutions, or
other Exempt Beneficial Owners.

Each member of the group of Related Entities
must be a Participating Foreign Financial
Institution, Registered Deemed Compliant
Foreign Financial Institution, Sponsored
Foreign Financial Institution, Non-Reporting IGA
Foreign Financial Institution, or an Exempt
Beneficial Owner.
However, the only Financial Accounts relevant to the
Agreements are equity/debt interests issued in CIVs.
A financial institution must identify and report
accounts only if the Entity maintains financial
accounts. Thus, an Entity that is an Investment
Entity because, for example, it administers CIVs but
does not itself maintain financial accounts, will not
have to identify and report. In addition, where fund
interests are held through intermediaries, it will be
the intermediary’s responsibility to identify and
report on its direct account holders.
Distributors in the chain of legal ownership will be
considered FIs maintaining financial accounts. This
includes certain fund nominees, intermediaries and
platforms. It is noted that such distributors will be
required to aggregate accounts to determine
whether exemption thresholds may apply, even if an
account holder has accounts across various CIVs.
Distributors that act in an advisory-only capacity and
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EY observation
Analysis of a fund’s investors to ensure the
qualifications above are met is crucial, as well as
implementing safeguards to ensure no future
investors who might taint the fund’s QCIV status are
allowed into the fund.
Sponsored Investment Entities
Any FI which is an Investment Entity may appoint
a Sponsor to take on its due diligence, registration
and reporting obligations — though not permitted
for an Entity that is a Qualified Intermediary (QI),
Withholding Foreign Partnership (WP), or
Withholding Foreign Trust (WT) under the
US regulations.
If a Sponsoring Entity is appointed, it must register as
such with the IRS under the US Agreement, and take on
all due diligence and reporting obligations of the
Sponsored Investment Entity. This includes account
identification and documentation for new investors
as well.
In classifying an account as New or Pre-Existing, a
Sponsor acting on behalf of a range of CIVs can look
to whether the account is new to the Sponsor and
not the CIV itself. This will alleviate duplicative
document requests of the same investors invested in
more than one CIV. Where a Sponsor is able to link
accounts in this manner, the accounts will also need
to be aggregated.
If a Sponsoring Entity is appointed, there is no
requirement to register the Sponsored Entity, unless
it has a US Reportable Account. If such an account is
identified, the Sponsored Entity must register and
obtain its own GIIN on or before the later of
31 December 2015 or 90 days after the reportable
account is identified.
EY observation
Where a Sponsoring Entity is the Sponsor for funds
in multiple jurisdictions, the Sponsor would need to
report on behalf of each fund based on the reporting
requirements in each fund’s jurisdiction. One fund
may be in a Model 1 IGA location and thus report to
the TIA, while another fund may be in a non-IGA
location and thus the Sponsor would need to report
directly to the IRS.
The updated guidance notes add a final section
(7.10), covering the requirements of Transfer
Agents or Service Providers in obtaining due
diligence documentation from investors with
multiple accounts with that Transfer Agent of
Service Provider. Where such an Agent or
Provider has been appointed a FATCA services
provider to a number of FIs, they are not
required to obtain documentation for each
account held by the same investor. They may
obtain one set of FATCA due-diligence
documentation for an investor to validate the
same investor’s status in all FIs serviced by that
Transfer Agent.
Chapter 8: Other specific vehicles
Securitization or structured finance vehicles
A typical structure consists of an Issuing Entity
(SPV), Noteholder, Seller or Originator, Trustee,
Collateral Manager (CLO), Swap Counterparty, and
other service providers. Whether any of these
entities meets the definition of an FI under section 2
should be reviewed.
However, issuing entities are likely to be classified
as Investment Entities and typically would be a
(1) collateralized loan obligation or CLO transaction,
(2) Cat bond or Insurance Linked Securities
transaction, and (3) a repackaging or other form of
structured finance transaction as detailed in
section 8.2. The updated guidance notes have
added collateralized debt obligation (CDO) or
CDO transaction as a fourth type of entity for this
section. This section also adds additional definitions
around SPVs.
Entities that may not fall within the definition of an
Investment Entity include Asset Finance SPVs. These
entities typically own one or more aircraft, ships or
other form of moveable asset and finance the
acquisition through debt financing. An Asset
Finance SPV would typically be categorized as a
Passive NFFE.
EY observation
As a Passive NFFE, an Asset Finance SPV would still
be required to certify if it had any financial accounts
held by Specified US Persons or Non-US Entities with
Controlling Persons that are Specified US Persons.
10
Segregated Portfolio Companies, Umbrella
Funds and Multi-issuance Entities
beneficiaries, and other natural persons exercising
ultimate control over the trust.
Section 8.4 provides insight on these entities. These
types of entities may be treated as a whole and it is
not necessary to treat each separately, unless the
Entity wishes to do so.
In relation only to NFFEs, a 25% ownership threshold
applies for companies, partnerships, trusts
and foundations.
EY observation
This section provides flexibility for these types of
entities to either treat them as one or separately for
registration and reporting. The determination should
be made by these structures after consideration of
the relevant issues for each situation. To avoid
potential certification issues with brokers or
custodians in relation to each portfolio, fund or
series, it may be more practical, in some cases, to
treat each separately and register each separately
so that, for US Agreement purposes, a GIIN is
acquired by each to be provided with any Form W8BEN-E that might be requested by third parties.
Chapter 9: NFFEs
Active NFFEs (as defined in section 9.3) and Passive
NFFEs (as defined in section 9.2) have no
registration or reporting requirements to the TIA or
the IRS. Passive NFFEs may however choose to be
“Direct Reporting NFFEs” and “Sponsored Direct
Reporting NFFEs” under the modified US regulations.
Active and Passive NFFEs are required to determine
their FATCA/IGA classification and self-certify to any
FI that maintains accounts held by that NFFE.
Passive NFFEs may be required to obtain a selfcertification from a Controlling Person of that NFFE.
An FI will have to report Financial Accounts held by
Passive NFFEs with Controlling Persons that are
Specified Persons.
The updated guidance notes, to be in line with the US
Regulation changes, have added the new Passive
NFFE category (Direct Reporting NFFEs and
Sponsored Direct Reporting NFFEs) in section 9.4.
“Controlling Person” means a natural person who
exercises direct or indirect control over an Entity.
For trusts, this includes the settlor, trustees,
protector, identifiable beneficiary or class of
EY observation
Details around the income requirements for Active
versus Passive NFFE status, as well as examples, are
provided in sections 9.3 through 9.5 and section 9.8.
Chapter 10: Financial accounts
An FI , unless exempt, must identify (1) whether it
maintains any Financial Accounts, (2) the type of
Financial Accounts maintained, and (3) whether the
account holder of the Financial Accounts is a
Specified Person or a Passive NFFE with one or more
Controlling Persons who are Specified Persons.
An FI acting as an executing broker (simply executing
trading instructions, or receiving/transmitting
trading instructions to another executing broker),
and not a custodian will not be required to treat
those facilities as a Financial Account.
The updated guidance notes have added a new
section 10.1.3, which provides clarity around when
accounts might cease to be Reportable Accounts.
Joint accounts
Where a Financial Account is jointly held, the value
will be attributed in full to each joint holder of the
account. This applies to both aggregation and
reporting requirements.
Products exempt from being Financial Accounts
include (1) retirement accounts and products as set
out in Annex II of the Agreements, (2) certain other
tax favored accounts or products, for which there
are none currently identified specific to the Cayman
Islands, (3) accounts of deceased persons, as long as
certification of death is held by the FI, and
(4) intermediary/escrow accounts established for
certain purposes as defined in section 10.15.
11
Dormant accounts
Dormant accounts fall under the reporting
requirements for recalcitrant account holders.
FIs may use their current operating policy for
classifying these accounts or, if not applicable,
the following may be used in classifying an account
as dormant:



No activity in the past three years
Account holder has not contacted FI regarding
any account in past six years
Account is not linked to an active account held
by the same account holder
Dormant funds
The updated guidance notes have expanded the
Dormant Funds section (10.18.1), renaming it
“Dormant and Liquidating Investment Entities”. This
updated section better defines the requirements
when an Entity that has been an Investment Entity is
(1) closed, or (2) a Liquidator has been formally
appointed but there remain residual assets and
debtors and realization or recovery actions are being
pursued. In these situations, the Investment Entity
will not be an Investment Entity for the purposes of
the Agreements. If the Entity was closed or in
liquidation before 30 June 2014, then no
registration or reporting is required in relation to
that business. However, when the Entity is no longer
considered an Investment Entity after 1 July 2014, a
final return should be made in accordance with the
reporting requirements if applicable by or before the
next reporting deadline.
Chapter 11: Registration
Registration is a requirement under the US
Agreement and not a current requirement under the
UK Agreement. As part of this process, the FI will
receive a GIIN.
The following have registration requirements:


All Cayman Islands Reporting Financial
Institutions and Registered Deemed Compliant
Financial Institutions as defined under the
US Agreement
Any FI with a local client base that has a
reporting obligation due to some
reportable accounts

Any Sponsored Investment Entity that has
reportable accounts will need to be registered by
its Sponsoring Entity
FIs in a Model 1 IGA jurisdiction, such as the Cayman
Islands, were not required to provide verification of a
GIIN to withholding agents prior to 1 January 2015.
Prior to that date, an FI could have confirmed its
status by any of the following:


Providing a Withholding Certificate
Providing FATCA W-8BEN-E certifying the
Entity’s FATCA classification and other
required information
Note that a Reporting FI in a Model 1 IGA must have
registered prior to 1 July 2014 if (1) it maintains
one or more branches (other than a limited branch
or US branch) in non-Model 1 IGA locations, (2) if it
is renewing Qualified Intermediary (QI), Withholding
Foreign Partnership (WP), or Withholding Foreign
Trust (WT) Agreement, and (3) if it intends to be
a Lead FI for one or more Member Financial
Institutions that are not established in, and
operating exclusively in, other Model 1
IGA jurisdictions.
EY observation
Reporting Financial Institutions should still consider
registering to obtain their GIIN. This may be a
preferable option to avoid any delays or run afoul of
any internal policies or investor requirements. To
have been on the 1 January 2015 IRS List, a
Reporting Financial Institution should have
registered and obtained a GIIN by 22 December
2014. Failure to have been registered by 1 January
2015 would result in an Entity not being compliant
with the Model 1 IGA and thus subject to withholding
as of 1 January 2015 by withholding agents. Now that
the IRS has issued the W-8BEN-E form and
instructions, it is recommended that this be the
document completed and submitted to withholding
agents. The Cayman Islands is allowing selfcertification forms to be used in lieu of US tax forms
for FATCA compliance; however, US withholding
agents may still require the US forms for compliance
with US regulations separate from FATCA.
12
Chapter 12: Due diligence
General requirements
FIs are responsible for identification and reporting of
Financial Accounts held by Specified Persons or by
Passive NFFEs with one or more Controlling Persons
who are Specified Persons or by Non-Participating
Financial Institutions.
FIs can rely on third-party providers to fulfill their
obligations, but the obligations remain the
responsibility of the FI and any failure to comply with
the regulations falls on the FI.
FIs must follow one or more of the following
processes for account holder identification,
depending on whether the account holder is an
individual/entity and whether the account is preexisting/new:



Indicia Search – this may include information held
for Cayman Islands AML/CFT (Anti-Money
Laundering/Countering the Financing of
Terrorism) rules
Self-certification – from account holder or
Controlling Person of a Passive NFFE
Publicly available information (entities only)
Self-certifications
As part of the identification process, FIs can rely on
self-certifications in relation to individuals and
entities as follows:


In relation to Individual account holders, selfcertification may be used to (a) capture name,
permanent residence address and country of
birth, (b) establish countries where new account
holder is resident for tax purposes, (c) to obtain
a TIN or similar number from new account
holders for each country where they are resident
for tax purposes, and (d) show that an individual
is not in fact a resident for tax purposes of a
country, even if indicia are found indicating such
residency in relation to a low-value or a highvalue Pre-Existing Account that they hold.
In relation to Entity account holders, selfcertification must be used if the FI cannot
determine status from information in its
possession or readily available to (a) capture
name and country of incorporation or
organization, (b) establish status of the entity
where not reasonably determined that the
account holder is not a Specified Person,
(c) establish status of FI that is neither a Cayman
Islands FI nor an FI in an IGA jurisdiction,
(d) establish whether an entity is a Passive NFFE
or (e) establish status of a Controlling Person of
a Passive NFFE and whether he/she is resident in
a relevant country for tax purposes.
The form must be signed and dated by the account
holder, and can be in paper or electronic format. It
can include the use of withholding certificates (i.e.,
US Forms W-8/W-9).
Alternatively, the Cayman Islands Government issued
self-certification form templates for industry usage in
July of 2014. A specific form for Individuals and
Entities was developed by the FATCA Working Group
and the Cayman Islands TIA is satisfied that these
forms may be used for the purposes of FATCA
Compliance. Cayman Islands FIs may use these forms
as a basis for self-certification and adapt or modify
them as necessary to suit their own usage. These
forms can be found on the following website:
http://www.tia.gov.ky/html/assistance.htm
A self-certification cannot be relied upon if an FI has
reason to believe it is incorrect, unreliable, or if there
is a change in circumstances regarding the account
holder’s status.
The updated guidance notes have added new
sections, 12.2.1 and 12.2.2, which provide
additional insight on the requirements where an FI
already holds a self-certification for an account
holder, and the timing of self-certifications.
For all new individual accounts, there is no
prescriptive wording that must be used for such
self-certification. However, a determination of
whether or not the individual is a citizen or resident
of the US must be able to be made from the
certification. It should be sufficient for an account
holder to confirm they are or are not resident in the
US for tax purposes, and that they are or are not
a US citizen. For the UK Agreement, residence is
important and citizenship is not relevant.
Examples of how to administer the collection of
13
self-certifications are provided in the guidance
notes in section 12.4 (e.g., telephone applications,
online applications and paper applications).
For Pre-Existing individual accounts, FIs that
identify US indicia while performing due diligence of
accounts must report on these accounts unless selfcertification proving that the account holder is not a
US person, such as IRS Form W-8BEN or approved
self-certification form, is obtained and valid.
For New Entity Accounts, unless the FI can identify
or rely on information it holds or is publicly
available, it must obtain self-certification from
Entity account holders identified as the following:
(1) Specified Person, (2) FI that is neither a Cayman
Islands FI, an FI in an IGA jurisdiction, a
Participating Financial Institution, a Deemed
Compliant FI or an Exempt Beneficial Owner, or
(3) a Passive NFFE.
If the Entity is an NFFE and is passive, FIs must
identify Controlling Persons and obtain selfcertification from them to determine whether or not
they are US persons.
For Pre-Existing Entity Accounts, self-certification
may be obtained where an Entity is identified as a
possible US person in due diligence so as to allow the
Entity to confirm or deny that they are or are not a
US person.1 For Pre-Existing Entity Accounts selfcertification must be obtained:



1
Where an Entity is an FI not domiciled in the
Cayman Islands or another partner jurisdiction
unless the FI is able to otherwise verify the
Entity’s FATCA status
Where an Entity is a passive NFFE (unless
information is available to determine that the
Entity is an active NFFE)
Where one or more passive NFFEs hold the
account and the account’s balance exceeds
US$1 million
Note that the account is reportable, unless valid selfcertification is received confirming that the Entity is not a US
person, i.e., an IRS Form W-8BEN-E or self-certification form
approved for use by the Cayman Islands Government. In
practice, therefore, it would seem essential for an FI to make a
reasonable effort to give the account holder an opportunity to
self-certify.
IRS Forms W-8 and W-9 may be used for selfcertification and, as stated above, the Cayman
Islands Government has issued self-certification
templates for industry usage which may be used for
the purposes of FATCA Compliance. It is important
to note, however, many institutions may still be
required to submit the US forms (W-8 and W-9) to US
withholding agents who are required by US law to
receive the IRS forms for non-FATCA reporting
requirements on non-US account holders.
Section 12.8 details confirming the reasonableness
of self-certifications by an FI. An FI receiving a selfcertification must consider other information it has
obtained concerning the account holder, including
any documentation collected pursuant to AntiMoney Laundering (AML) and Know Your Client
(KYC) procedures to determine whether the selfcertification is reasonable. If any apparent conflicts
are evident, then further inquiries are required by
the FI. If a third party performs AML for an FI, the FI
may request that the third party obtain selfcertifications for purposes of the legislation. The
third party should then confirm the reasonableness
of the self-certification.
Chapter 13: Pre-Existing individual accounts
Chapter 13 distinguishes accounts as (1) exempt by
threshold, (2) exempt Cash Value Insurance and
Annuity contracts unable to be sold to US residents
(US Agreement only), (3) low value, and (4) high
value.
The assignment of an insurance contract will be
treated as a new account and should be treated
under the review procedures for new accounts.
Reportable depository accounts must be reviewed
annually for the US$50,000 threshold (assuming the
de minimis limit is applicable) and if, in a subsequent
year, these accounts fall below the threshold, the
account is no longer reportable.
Low Value Accounts are those with a balance or
value exceeding US$50,000 (or US$250,000 for
Cash Value Insurance and Annuity Contracts), but do
not exceed US$1,000,000.
14
For Low Value Accounts, electronically searchable
data must be reviewed by the FI for any of the seven
potential US indicia items described in section 13.6
for the US Agreement, and any US indicia may be
cured as long as the requirement for each US indicia
is met in section 13.6.2.
Section 13.6.3 details the UK indicia required to be
searched for under the UK Agreement, while section
13.6.4 details how UK indicia may be cured under
the UK Agreement.
For a change in circumstance that gives rise to US or
UK indicia, the FI must obtain self-certification from
the account holder; otherwise, the account should be
treated as reportable. If the account holder does not
respond to requests for a self-certification, then the
FI should treat the account as a reportable account
until the FI is provided with the necessary
information to cure or repair the indicia.
The guidance notes state that Pre-Existing Low
Value Accounts are reportable in the year that they
are identified as reportable in the due diligence
procedures (i.e., if found to be reportable in 2015
only reportable beginning in the return for 2015).
High Value Accounts are Pre-Existing Accounts with
a balance or value exceeding US$1,000,000 at
30 June 2014 or at 31 December of any
subsequent year.
For High Value Accounts, electronically searchable
data must be reviewed in the same manner as for
Low Value Accounts for both the US and UK
Agreements. Section 13.9 details that a paper
record search will be necessary unless the electronic
search confirms the six items listed for the US
Agreement. A paper record search would need to
review the five items detailed in this section for any
US indicia.
Section 13.9 also details that, under the UK
Agreement, a paper record search will be necessary
unless the electronic search confirms the four items
listed. Should a paper search be required, there are
five items required to be reviewed for UK indicia
under the UK Agreement.
An FI can rely on the review of a High Value Account
performed by a third-party distributor where there is
a contract obligating the distributor to perform
the review.
An FI is not required to do a paper search for any
Pre-Existing Individual Account for which it has
retained a withholding certificate and acceptable
documentary evidence establishing Non-US status of
the account holder.
Where one or more indicia is found and no cure or
repair can be applied, an FI must treat the account
as a Reportable Account for the current and all
subsequent years.
Any accounts that the FI obtained documentation for
as a Qualified Intermediary (QI) do not have to be
reviewed in an electronic search or a paper search
(relationship manager inquiries, when applicable, are
still required).
Section 13.11 details the obligations and
responsibilities of a Relationship Manager in terms of
a High Value Account. This section also defines who
a Relationship Manager is for these purposes. If the
Relationship Manager has actual knowledge that an
account holder is a Specified Person, then the
account must be reported unless the indicia can
be cured.
Timing of reviews (Low Value Accounts)
Completed by 30 June 2016 for accounts meeting
this criteria as of 30 June 2014.
Timing of reviews (High Value Accounts)
Completed by 30 June 2015 for accounts meeting
this criteria as of 30 June 2014.
Chapter 14: New individual accounts
The following requirements are applicable for any new
individual account opened on or after 1 July 2014.
The FI must obtain a TIN for Specified US Persons or
date of birth and a National Insurance Number for
Specified UK Persons.
For new accounts or Pre-Existing Accounts, there is no
need to re-document the account as long as (1) the
appropriate due diligence has been carried out or there
15
is reliable evidence that the appropriate due diligence
requirements are in the process of being carried out for
the Pre-Existing Account, and (2) the accounts are
treated as linked or as a single account for purposes of
applying the due diligence requirements. Change in
circumstance rules and aggregation rules apply to
this situation.
For all new accounts (aside from depository accounts
under US$50,000 where an election has been made to
exempt and cash value insurance contracts under
US$50,000), a self-certification must be obtained
and confirmed for reasonableness against AML/KYC
documentation. In the absence of valid
self-certification, the account would be a
reportable account.
Where information already held by an FI conflicts
with any statements or self-certifications, or if the FI
has reason to know that the self-certification or
documentary evidence is incorrect, the FI may not
rely on that evidence of self-certification. “Reason to
know” that a self-certification or other
documentation is unreliable or incorrect exists
where, if based on the relevant facts, a reasonably
prudent person would know this to be the case.
Chapter 15: Pre-Existing Entity Accounts
Entity accounts in existence at 30 June 2014 are
deemed to be Pre-Existing; however, recent
regulations offer FIs the option to elect to substitute
a later date.
EY observation
Cayman Islands Regulations for the US Agreement
under section 5(5)(f) state that a New Entity
Account is a financial account opened after 30 June
2014 except insofar as a Reporting Financial
Institution has elected to substitute a date no later
than 31 December 2014 for the 30 June 2014 date.
Steps for determination of FATCA classification
status must be followed in order. There are six
separate classifications for Pre-Existing Entity
Accounts as listed in section 15.2 of the
guidance notes.
reportable where self-certification is not provided or
the Entity’s status cannot be determined from
currently held or publicly available information.
An FI may rely on previously recorded information
and standardized industry codes for determining an
Entity’s status. Standardized industry codes may not
be relied upon if US or UK indicia is found per
sections 13.6.1 and 13.6.3, respectively. If indicia is
found, the FI may only treat the Entity as nonreportable if it obtains a self-certification from the
Entity and one form of acceptable documentary
evidence establishing the Entity’s non-US or non-UK
status (e.g., Certificate of Incorporation).
Sections 15.6 through 15.9 detail the requirements
for identification of entities as the following types:
(1) Specified Persons, (2) FIs, (3) Non-Participating
Financial Institutions (US Agreement only), and
(4) NFFEs.
Timing of reviews
If the balance of an account has been exempted
because it does not exceed US$250,000, then if it
increases to exceed US$1 million in a year
subsequent to 2013, the FI must perform due
diligence as prescribed in this chapter by 30 June of
the following year after 30 June 2016.
Chapter 16: New Entity Accounts
A New Entity Account is an account opened by or for
an Entity on or after 1 July 2014; however, recent
regulations offer FIs the option to elect to substitute
a later date.
EY observation
As previously referenced under Chapter 15, the US
Agreement states that a New Entity Account is a
financial account opened after 30 June 2014,
except insofar as a Reporting Financial Institution
has elected to substitute a date no later than
31 December 2014 for the 30 June 2014 date.
Steps for determination of FATCA classification
status must be followed in order. There are six
separate classifications for New Entity Accounts as
listed in section 16.2 of the guidance notes.
If the account holder is a Non-Participating FI, only
payments made to that Non-Participating FI will be
reportable. Similarly, an Entity Account will also be
16
Reporting on New Entity Accounts follows similar
guidelines as Pre-Existing Entity Accounts and is
detailed under section 16.2.
reference number. The local reference number will
be generated by the TIA during the online
notification process by the FI.
There are no threshold exemptions that apply for
New Entity Accounts (there is an exception related
to credit card accounts where the FI has policies to
prevent account holders from establishing credit
balances in excess of US$50,000).
In addition to points (a) to (g) above, the following is
required to be reported for a Custodial Account for
the calendar year in question:
New accounts for Pre-Existing Entity account holders
may be treated by the FI as one account for
purposes of applying AML/KYC due diligence. The FI
may choose to apply identification and
documentation procedures for either Pre-Existing or
New Accounts to determine the classification for any
Accounts opened on or after 1 July 2014 by the
same Entity.

Sections 16.5 through 16.8 detail the requirements
for identification of entities as the following types:
(1) Financial Institutions, (2) Non-Participating
Financial Institutions (US Agreement only),
(3) Specified Persons, and (4) Non-Financial
Foreign Entities.



Gross total interest paid or credited to the
account
Gross total dividends paid or credited to the
account
Gross total amount of other income paid or
credited to the account
Total gross proceeds from sale or redemption of
property paid or credited to the account
The first three items are first reportable in respect to
the Reporting Year 2015 onwards, while gross proceeds
are not required to be reported until the Reporting
Year 2016 onwards.
For Depository Accounts, in addition to points (a) to (g)
above, the total amount of gross interest paid or credited
in the calendar year must be reported for the Reporting
Year 2015 onwards.
Chapter 17: Reporting obligations
FIs that have identified Reportable Accounts must
report certain information on those accounts to the
TIA per the timetable detailed in section 17.5.
For Cash Value Insurance Contracts, In addition to
points (a) to (f) above, the following must be reported for
the Reporting Year 2015 onwards:

The required information to be reported is detailed
in section 17.1 and is specific to the type of account
and the Specified Person or Controlling Person of
the account.
For Specified Persons and Controlling Persons of
certain Entity Accounts, the information to be
reported is: (a) name, (b) address, (c) TIN for
Specified US Persons, (d) date of birth and National
Insurance Number for Specified UK Persons, (e) the
account number or functional equivalent if no
account number exists, (f) the name and GIIN of the
Reporting Cayman Islands FI, and (g) the account
balance or value at calendar year end or, if the
account was closed, the value immediately before
account closure.

The annual surrender value amount of the
account reported to the policyholder
The amount calculated by the Specified
Insurance Company at 31 December and any
partial surrender taken during the policy year
The address to be reported for an account of a
Specified Person is the residence address of record
according to the Reporting FI or, if no residence
address, the mailing address used by the Reporting FI.
For Pre-Existing Individual Accounts that are
reportable, a US TIN under the US Agreement (or date
of birth and National Insurance number under the UK
Agreement) needs to be provided only if it exists in the
records of the Reporting FI and, in absence of a TIN, a
birth date should be provided if that information is held
by the FI.
For the UK Agreement, where the Reporting Cayman
Islands FI does not have a GIIN it will report a local
17
The Reporting FI is required to obtain a US TIN for PreExisting Individual Accounts by 1 January 2017 under
the US Agreement (or National Insurance Number
under the UK Agreement).
For New Individual Accounts identified as Reportable
Accounts from 1 July 2014 onwards, a selfcertification must be obtained. Under the US
Agreement, this can be the IRS Form W-9 or another
approved self-certification form that meets certain
requirements. Note that a New Entity Account is a
financial account opened after 30 June 2014 except
insofar as the Reporting FI has elected to substitute a
date no later than 31 December 2014 for the 30 June
2014 date.
If the account holder fails to provide a US TIN or
evidence of Non-US status and the account becomes
active, the account is to be treated as reportable.
An FI is not obligated to verify that any US or UK
related information is correct, and will not be held
accountable where information provided by an
individual proves to be inaccurate and the FI had no
reason to know.
Account balance or value
The balance or value may be reported in USD or in the
currency in which the account is denominated. The
balance or value will be that shown on 31 December
unless the account is closed prior to that date.
For jointly held Financial Accounts, the balance or
value reported in respect of the Specified Person is
the entire balance or value of the account. This is
similar for Controlling Persons of NFFEs that jointly
hold accounts.
Nil returns
Reporting Cayman Islands FIs with no Reportable
Accounts are required to make a report to that effect
to the TIA. This is required under both the US and UK
Regulations.
Multiple Financial Institutions – duplicate
reporting
Cayman Islands FI to report the same account where
it has actual knowledge that another FI has or will be
reporting the account (regardless of whether that FI
is a Cayman Island FI or not). “Actual knowledge” is
defined as holding written confirmation from the
Reporting FI in the other jurisdiction that the
Financial Account has been reported for FATCA
purposes or under an agreement equivalent to the
UK Agreement. The Cayman Islands FI is still
responsible for ensuring the account has been
reported and subject to any fines or penalties if it is
determined no report has been made.
Reporting on Non-Participating Foreign Financial
Institutions (NPFFIs) (US Agreement only) – Where an
FI makes payments to an NPFFI, it is required to
report the name and aggregate value of payments
made to each NPFFI for the 2015 and 2016 years.
The requirement is a temporary solution to the
requirement to withhold on pass-through payments
under the US provisions. A Cayman Islands FI that
complies with the above reporting requirements will not
be subject to withholding. The payments required to be
reported are detailed in section 17.6, as well as any
payments that are excepted from NPFFI reporting
(section 17.6.1) and other reporting considerations for
NPFFI payments (section 17.6.2).
EY observation
Under the current US Agreement “pass-through
payment withholding” is scheduled to take effect as of
1 January 2017, though this could be eliminated or
further delayed. Whether the NPFFI reporting
requirements continue after 2016 should be
considered by FIs in developing their tax information
reporting systems and the account holder
identification process.
Third-party service providers may be used to undertake
reporting obligations for Reporting Cayman Islands FIs,
but the responsibility for ensuring that the reporting is
complete, correct and timely remains with the FI.
Reporting Cayman Islands FIs will report the required
data electronically to the TIA in the required format.
Penalties will be applied for failure to comply and are
set out in the Regulations.
Where multiple FIs have reporting obligations in
respect to the same account, there is no need for the
18
Chapter 18: Compliance
Minor errors
In the event that information reported is corrupted or
incomplete, the recipient country will notify the TIA.
Minor errors in compliance include data fields missing
or incomplete, data that has been corrupted and use of
an incompatible format.
Compliance measures may be exercised by the TIA if
the error is considered to contravene the Regulations.
Continued or repeated administrative or minor errors
could be considered as significant non-compliance
where they disrupt and prevent transfer of
the information.
Significant non-compliance
Significant non-compliance may be determined by the
IRS (in respect of the US Agreement), HMRC (in respect
of the UK Agreement) or the TIA.
EY observation
It is important to remember that while third-party
service providers may be relied upon to meet FATCA
obligations, FIs will still remain accountable.
Chapter 19: Prevention of avoidance
The Regulations (both US and UK) detail anti-avoidance
measures directed at arrangements taken by any person
to avoid the obligations required by the Regulations.
The intention is that the term “arrangements” will be
broadly interpreted, with the effect of the rule being that
the Regulations will apply as if the arrangements had not
been entered into.
Specific details on the penalties related to non-compliance
can be found in the Cayman Islands Tax Information
Authority Regulations enacted for both the US and
UK Agreements.
Examples of significant non-compliance include:
(1) repeated failure to file a return or repeated late
filing, (2) ongoing or repeated failure to register or
establish appropriate governance or due diligence
processes, (3) the intentional provision of substantially
incorrect information, and (4) the deliberate or
negligent omission of required information.
Where one Competent Authority notifies the other of
significant non-compliance, there is an 18-month period
in which the FI must resolve the non-compliance.
Where the TIA is notified of significant non-compliance
by a Reporting Cayman Islands FI, the TIA may exercise
any compliance measures under the Regulations. The
TIA will also engage with the Reporting Cayman Islands
FI to discuss the non-compliance, remedies/solutions to
prevent further non-compliance, and adopt measures
and a timetable to resolve the non-compliance.
In the event that the issues remain unresolved after
18 months, then the Reporting Cayman Islands FI will
be treated as a Non-Participating Financial Institution
(NPFI) under the US Agreement. There is no equivalent
sanction under the UK Agreement, but compliance
measures may be exercised by the TIA under
the Regulations.
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Conclusion
The guidance notes, taking input from both Cayman Islands
institutions and the global financial industry at large, were
issued to provide clarity and understanding around this
complex regulatory initiative. An institution is thus advised to
review, in consultation with its advisors, the actual Cayman
Islands guidance notes, as well as the regulations and
Cayman Islands IGAs with the US and UK for ultimately
determining its compliance requirements under FATCA and
other information reporting regimes.
As the global tax information reporting initiatives evolve
and regulations conform, the Cayman Islands guidance notes
will be updated on a regular basis around key issues
and terms that require further insight to assist industry
with compliance.
Appendix 1 – Relevant documents
The following provides links to the US Agreement and the
UK Agreement documents as follows:





UK and UK Intergovernmental Agreements
Tax Information Exchange Agreement
US Treasury FATCA Regulations
The TIA (United States) Regulations and the TIA
(United Kingdom) Regulations
Double Tax Arrangement between the UK and
Cayman Islands
Appendix 2 – UK Agreement: specific
elements
In the meantime, if you have any questions, please contact
a member of our FATCA team:
Jun Li
Partner, Tax
Ernst & Young LLP (New York)
+1 212 773 6522
jun.li@ey.com
Dmitri Semenov
Partner, Tax
Ernst & Young LLP (New York)
+1 212 773 2552
dmitri.semenov@ey.com
Bill Bailey
Partner, Tax
Ernst & Young Ltd. (Bermuda)
+1 441 294 5319
bill.bailey@bm.ey.com
Chris Larkin
Senior Manager, Tax
Ernst & Young Ltd. (Cayman Islands)
+1 345 814 8919
chris.larkin@ky.ey.com
Blaise Ting
Senior Manager, Tax
Ernst & Young Ltd. (Cayman Islands)
+1 345 814 8918
blaise.ting@ky.ey.com
Appendix 2 of the Cayman Islands IGA guidance notes
provides details on Annex III of the UK Agreement’s
Alternative Reporting Regime (ARR) for UK Resident
Non-Domiciled Individuals.
Mike Mannisto
Partner, Assurance
Ernst & Young Ltd. (Cayman Islands)
+1 345 814 9003
mike.mannisto@ky.ey.com
Chris Maiato
Principal, Advisory
Ernst & Young Ltd. (Bermuda)
+1 441 294 5346
chris.maiato@bm.ey.com
20
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EYG no. CK0890
1501-1380715