United States of America / Cayman Islands Intergovernmental Agreement to Implement FATCA (29 November 2013)

Summary

This is the intergovernmental agreement (IGA) between the Cayman Islands and the United States, signed 29 November 2013, that provides the legal framework for implementing the U.S. Foreign Account Tax Compliance Act (FATCA) in the Cayman Islands. It is a 'Model 1' style IGA: rather than Cayman Islands financial institutions reporting directly to the U.S. Internal Revenue Service (IRS), they instead identify and report information on U.S. Reportable Accounts to the Cayman Islands Tax Information Authority (the Competent Authority), which then automatically exchanges that information with the IRS on a reciprocal, government-to-government basis.

Scope and Key Definitions

• Cayman Islands Financial Institutions: a term covering Custodial Institutions, Depository Institutions, Investment Entities and Specified Insurance Companies organized in or operating branches in the Cayman Islands.
• Reporting Cayman Islands Financial Institutions: must carry out due diligence and reporting.
• Non-Reporting Cayman Islands Financial Institutions: deemed-compliant or exempt entities listed in Annex II.
• Annex I: sets out the due diligence procedures for identifying U.S. Reportable Accounts (accounts held by Specified U.S. Persons or by non-U.S. entities with controlling U.S. persons).
• Annex II: lists categories of exempt beneficial owners and deemed-compliant entities and products.

The document itself is largely definitional and procedural, establishing the legal basis and mechanics for automatic exchange rather than prescribing specific domestic filing deadlines - those are typically set out in subsequent Cayman Islands domestic regulations and DITC guidance notes issued under this framework.

• Fixed dates: The IGA references certain fixed dates relevant to the treatment of registered interests as Financial Accounts (1 July 2014 and 1 January 2016).
• Obligations: Cayman Islands financial institutions may face obligations to register with the IRS and to identify and report reportable accounts to the Cayman Islands Competent Authority for onward exchange.

Key obligations

• Reporting Cayman Islands Financial Institutions must apply the due diligence procedures set out in Annex I to identify U.S. Reportable Accounts.
• Reporting Cayman Islands Financial Institutions must report identified U.S. Reportable Account information to the Cayman Islands Tax Information Authority (Competent Authority) for automatic exchange with the IRS.
• Entities relying on Non-Reporting Financial Institution status must fall within a category described in Annex II or otherwise qualify as a deemed-compliant FFI or exempt beneficial owner under relevant U.S. Treasury Regulations.
• For interests in a Financial Institution first registered on its books on or after 1 July 2014, the Financial Institution must, from 1 January 2016, treat such interests as not 'regularly traded' (and thus as Financial Accounts) unless a meaningful volume of trading exists on an established securities market.

Applies to

Cayman Islands Financial Institutions, Reporting Cayman Islands Financial Institutions, Non-Reporting Cayman Islands Financial Institutions, Custodial Institutions, Depository Institutions, Investment Entities, Specified Insurance Companies

Deadlines

• July 1, 2014: Threshold date after which interests first registered on a Financial Institution's books are subject to special 'regularly traded' treatment rules for Financial Account classification.
• January 1, 2016: Date from which a Financial Institution must apply the rule treating certain interests registered on or after 1 July 2014 as not regularly traded (i.e., as Financial Accounts) if held by a non-intermediary registered holder.