Competent Authority Arrangement (Cayman Islands and the United States of America)

Summary

This document is the 2015 Competent Authority Arrangement (CAA) between the Cayman Islands Tax Information Authority (via DITC) and the U.S. Internal Revenue Service, implementing the Cayman Islands-U.S. FATCA intergovernmental agreement (IGA) signed in 2013. It is a technical, government-to-government agreement setting out the detailed procedures, formats, timelines and channels the two competent authorities will use to exchange FATCA information on U.S. Reportable Accounts and payments to Nonparticipating Financial Institutions, rather than a standalone law directly binding on private parties.

Matters Covered

• Registration: Registration of Cayman Islands Financial Institutions on the FATCA registration system and IRS FFI list.
• Exchange Timeline: The nine-month timeline for annual automatic exchange of information via the International Data Exchange Service (IDES).
• Data Formats and Notifications: The XML schemas and notification processes for confirming successful or failed file transmissions.
• Remediation and Non-Compliance: Procedures for remediation of administrative errors and IRS determinations of 'significant non-compliance.'
• Confidentiality: Confidentiality and data protection obligations.
• Cost Allocation: Allocation of costs between the competent authorities.
• Ongoing Administration: Mechanisms for consultation, modification, and discontinuation of the Arrangement.

While the direct parties are the two competent authorities, the Arrangement has practical consequences for Reporting Cayman Islands Financial Institutions and certain Non-Reporting Cayman Islands Financial Institutions (e.g., trustee-documented trusts, sponsored investment entities, sponsored controlled foreign corporations, sponsored closely held investment vehicles, collective investment vehicles, and institutions with a local client base) because their registration status, GIIN issuance, and reporting compliance underpin the automatic exchange process and the risk of being found significantly non-compliant. It became operative upon signature (December 2015) and applies retroactively to information for earlier calendar years.

Key obligations

• The Cayman Islands Competent Authority intends to exchange automatically with the U.S. Competent Authority the FATCA information described in Articles 2 and 4(1)(b) of the IGA within nine (9) months after the end of the calendar year to which it relates.
• Reporting Cayman Islands Financial Institutions and Paragraph 1.1.2 (deemed-compliant) Financial Institutions must comply with FATCA registration website requirements to be treated as compliant and to receive a GIIN.
• The U.S. Competent Authority should provide notice of successful or failed file processing to the Cayman Islands Competent Authority within fifteen (15) days of receipt.
• Where a Cayman Islands Financial Institution or Paragraph 1.1.2 Financial Institution self-identifies an omission or error in an exchanged report, the report should be amended and the Cayman Islands Competent Authority should forward the amended report to the U.S. Competent Authority.
• A registered Cayman Islands Financial Institution would be removed from the IRS FFI list if an issue of significant non-compliance is not resolved within eighteen (18) months.
• In the ordinary course, a determination of significant non-compliance based on failure to timely correct minor errors would not occur until at least 120 days after notice is provided to the Cayman Islands Competent Authority.
• Each Competent Authority should notify the other promptly of any actual or potential breach of the Confidentiality Protections regarding exchanged information.
• Each Competent Authority may request consultations on implementation, interpretation, application or modification of the Arrangement, and such consultation should occur within thirty (30) days of the request.
• The Competent Authorities intend to make the Arrangement publicly available through official publication within thirty (30) days from the last date of signature.

Applies to

Reporting Cayman Islands Financial Institutions, Non-Reporting Cayman Islands Financial Institutions (Paragraph 1.1.2 Financial Institutions), Financial Institutions with a Local Client Base, Trustee-Documented Trusts, Sponsored Investment Entities, Sponsored Controlled Foreign Corporations, Sponsored, Closely Held Investment Vehicles, Collective Investment Vehicles

Deadlines

• within nine (9) months after the end of the calendar year: Cayman Islands Competent Authority's intended timeframe for automatic exchange of FATCA information with the U.S. Competent Authority.
• within fifteen (15) days: U.S. Competent Authority should notify the Cayman Islands Competent Authority of successful or failed processing of a received information file.
• at least 120 days after notice: Expected minimum period before the U.S. Competent Authority would determine significant non-compliance for failure to timely correct administrative or minor errors.
• eighteen (18) months: Period within which an issue of significant non-compliance must be resolved before a registered Cayman Islands Financial Institution is removed from the IRS FFI list.
• within thirty (30) days of request: Timeframe within which consultation between the Competent Authorities on implementation, interpretation, application or modification of the Arrangement should occur.
• within thirty (30) days from the last date of signature: Intended timeframe for official publication of the Arrangement by each Contracting State.
• 4 December 2015 / 16 December 2015 (signature dates): Dates the Arrangement was signed by the Cayman Islands and U.S. Competent Authorities respectively; the Arrangement becomes operative on the later of the IGA's entry into force or the date of signature.