Background
The Tax Information Authority (International Tax Compliance) (Common Reporting Standard) Regulations 2015 implements CRS requirements on an international basis under Cayman Islands law. The CRS framework (in particular, the CRS reporting framework) represents a globally coordinated approach whereby income earned by individuals and entities is disclosed for tax transparency purposes.
The CRS compliance form requires a Reporting FI to: (i) disclose information relating to its financial accounts for the particular reporting period; (ii) confirm that it has and maintains written CRS policies and procedures; and (iii) confirm whether or not it is licensed or registered with the Cayman Islands Monetary Authority. That form is in addition to the annual CRS return which should have been filed for the 2022 reporting period by 31 July 2023.
CRS Compliance Form
In order to complete and submit the CRS compliance form, the Reporting FI must identify and confirm the tax residence status of all new and existing clients during 2022. In practice, this means the Reporting FI must obtain self-certifications regarding the CRS status of its clients. In order to collect tax identification numbers and other personal data on clients, the Reporting FI should have a data protection client information notice covering why that data is being collected, the purpose of the data, what data will be reported to the Cayman Islands Tax Information Authority (TIA) via the DITC portal and informing them that the TIA may exchange that information with other overseas tax authorities.
Enforcement
The TIA can impose financial penalties for mis-classifying legal entities and for non-compliance with the CRS reporting framework. We understand that there has been an increase in the frequency of CRS (and FATCA) compliance reviews initiated by the TIA following the TIA’s publication of its enforcement guidelines in August 2022 (and updated in March 2023) (available here).
Commentary
The shift towards greater tax transparency measures is evident and there has been an increased focus on having and maintaining appropriate written CRS policies and procedures to ensure the effective implementation of, and compliance with, due diligence and reporting procedures by Reporting FIs.
How appleby and Appleby Global Services can help
Appleby’s regulatory team and Appleby Global Services (list of available services here) supports clients in complying with their CRS obligations across the financial services industry by providing the following services:
- CRS legal entity classification: identifying an entity’s CRS status and any related DITC registration and reporting requirements;
- DITC registration: registering a Reporting FI on the DITC’s portal;
- DITC reporting: preparing and filing the annual CRS return (due by 31 July each year);
- CRS policies and procedures: preparing written CRS policies and procedures to demonstrate compliance with CRS due-diligence and reporting obligations;
- DITC audit assistance: assisting a Reporting FI in preparing for a DITC audit and successfully guiding them through the process; and
- CRS self-certification forms: advising on completing or reviewing self-certification forms.
Disclaimer: This information is provided for general information purposes only and is not intended to constitute legal advice. For specific legal and regulatory advice, please contact your usual Appleby contact.
