FATCA: Cayman Islands Investment Funds

ArchiveJul 24, 2014

3 min read

The Tax Information Authority (International Tax Compliance) (United States of America) Regulations, 2014 (“US Regs”); and
The Tax Information Authority (International Tax Compliance) (United Kingdom) Regulations, 2014 (“UK Regs”).
Specified US Person: a US citizen or tax resident, excluding certain listed or tax exempt entities,
Specified UK Person: a UK tax resident, excluding certain listed entities, depositary institutions, brokers and dealers, government bodies and UK retirement schemes.
NFFE: a non-US/non-UK tax resident entity, as applicable, that is not an FI.
Active NFFE: an NFFE that receives less than half its income as passive income and certain listed, government, non-commercial and holding entities.
Passive NFFE: an NFFE that is not an Active NFFE.
Nonparticipating FI: (US Regs only) an FI that is non-compliant with FATCA.
Pre-existing Accounts: accounts existing on 30 June 2014.
Certain pension funds.
Funds whose investors are all Exempted Persons.
Trusts with a Reporting FI trustee reporting on the trust’s behalf.
Funds with a registered sponsor complying on their behalf.
Funds regulated by the Cayman Islands Monetary Authority (“CIMA”), all the investors in which:
Apply for a GIIN (on the IRS’s FATCA registration portal) by 31 December 2014 (or, if later, within 30 days of commencing business).
Establish due diligence procedures (see below) to identify:
Maintain records of due diligence undertaken for 6 years after the relevant year.
Notify the TIA by 31 March 2015 (or 31 March in the first year it becomes a Reporting FI) that it is a Reporting FI (providing its name, status as an “Investment Entity”, GIIN and point of contact).
For 2015 and 2016 establish procedures to identify allocations/payments to investors who are Nonparticipating FIs.
Submit a return to the TIA by 31 May annually in respect of the prior calendar year
Notify the TIA if any of its previously notified details change.
Specified US Persons (US Regs).
Specified UK Persons (UK Regs). Relevant exemptions include:
Deceased investors and their representatives.
Investors with Pre-existing Accounts not exceeding US$50,000 (individuals) or US$250,000 (entities) on 30 June 2014 (unless the account exceeds such limit on the last day of 2015 or any subsequent year) (“De-minimis Pre-Existing Accounts”).
Investor’s name and address.
Investor’s US federal taxpayer identification number (“TIN”) or UK national insurance number (“NIN”), as applicable (not required until 2017 for Pre-existing Accounts).
Account number or functional equivalent.
Account balance at the end of the calendar year or when the account was closed during the year, if applicable.
Total gross credits during the year, or a statement that there were none.
(UK Regs only) If the investor is an individual, their date of birth (“DoB”).
If the investor is a Passive NFFE controlled by a Specified US Person/Specified UK Person (as applicable), that person’s name and address and, if an individual, their TIN and DoB/NIN and DoB (as applicable).
Investors with De-minimis Pre-existing Accounts: no requirements unless the FI elects to treat them as Reportable Accounts.
Other Investors with Pre-existing Accounts:
New Investors on or after 1 July 2014:
Non-compliance is generally an offence punishable by a fine of US$6,100 and/or 2 years’ imprisonment.
Directors, officers, managers, partners or trustees of an entity who consent to or connive in an offence or where an offence is attributable to their neglect, will also be guilty of the offence and subject to the same penalties.
retains access to and is able to produce the records and documentary evidence used to identify and report on Reportable Accounts; and
will remain liable for any failure by the third party to comply with those responsibilities.

Published July 24, 2014