Virtual Asset (Service Providers) Act Updates
On February 4, 2022, CIMA issued a notice providing an update on virtual asset service providers (“VASP”) registrations and regulatory developments. CIMA confirmed that the names and status of entities registered under the Virtual Asset (Service Providers) Act (as revised) can be identified using the “Search Entities” function on CIMA's website.
On February 22, 2022, CIMA issued a notice advising VASPs that the 'Travel Rule' provisions under the Anti-Money Laundering Regulations (as revised) (“AMLR”) would come into effect from July 1, 2022. VASPs registered with CIMA, including the VASP submitted registration applications, are required to advise CIMA of how they will comply with the Travel Rule, by submitting details of their compliance arrangements and applicable policies and procedures by March 31, 2022.
Department for International Tax Cooperation Updates
The Cayman Islands Department for International Tax Cooperation (“DITC”) has issued its February 2022 Updates Bulletin to advise on the following:
FI Deactivations
The DITC Portal now has functionality to deactivate a Financial Institution (“FI”) from the DITC Portal where the entity has ceased to exist or is otherwise no longer a Cayman Reporting FI.
To deactivate an FI from the DITC Portal, all CRS reporting obligations must be completed before the Principal Point of Contact (“PPoC”) submits a deactivation request. These obligations include a CRS Return (if applicable), CRS Filing Declaration and CRS Compliance Form for each year the FI had reporting obligations. Where an FI has ceased to exist, its PPoC must submit evidence that supports this claim, for example - Certificate of Dissolution/Strike-Off, trust deed indicating the date of termination or directors' resolution to terminate a cell of an SPC.
Where an entity is of the view that it should no longer be considered a Cayman Reporting FI, the evidence to be provided is expected to be in the form of a letter which includes (1) reason why the entity was initially classified as an FI; (2) reason why the entity is no longer an FI and from what date; (3) how the entity should now be classified (e.g. as a Passive or Active NFE) under the CRS; and (4) evidence supporting the claim, such as termination of an investment management agreement or self-certification forms.
When submitting an FI deactivation request, the PPoC must provide contact details for the person who will retain the FI's records for 6 years following the date of deactivation from the DITC Portal.
An entity does not cease to be classified as a Cayman Reporting FI for the sole reason of being in liquidation. In fact, in most cases residual assets and debtors remain, and realisation or recovery actions are being pursued, the results of which may be distributed to account holders. Liquidators (or equivalent) must ensure that the FI continues to satisfy all of its obligations under Part 2 of the Tax Information Authority (International Tax Compliance) (Common Reporting Standard) Regulations (as revised).
Amended CRS Reportable Countries List
An updated list of CRS Reportable Jurisdictions has been published in the Cayman Islands Gazette, Issue No.09/2022, on January 31, 2022. Jamaica, Kenya, and Morocco have been added as Reportable Jurisdictions for the 2021 Reporting Period (reports due in 2022), while Kuwait has been removed from the list of Reportable Jurisdictions.
Economic Substance (“ES”)
ES forms for entities tax resident overseas (“TRO Forms”) are now being accepted for successive reporting periods (i.e., a financial year following a financial year in respect of which a TRO Form has already been submitted). The submission deadline for TRO Forms is 12 months from the last date of the period being reported on (regardless of the relevant activity(ies) conducted). For example, the submission deadline for entities that required to submit a TRO Form for a reporting period/financial year that ended on December 31, 2020, was December 31, 2021.
The ES Return is in the process of being updated to allow for reporting by general partnerships, limited partnerships, exempted limited partnerships and foreign limited partnerships. The updated ES Return is expected to be added to the DITC Portal in Q1 2022.
New Enforcement Guidelines - CRS and ES
On 31 March 2022 DITC advised that Enforcement Guidelines in respect of the Common Reporting Standard (“CRS”) and Economic Substance (“ES”) frameworks have been issued by the Tax Information Authority (“TIA”).
The CRS Enforcement Guidelines and the ES Enforcement Guidelines set out the TIA’s principles and processes for taking enforcement action under their respective frameworks and apply to all persons within the scope of the TIA’s compliance monitoring and enforcement powers.
Both Guidelines should be read in conjunction with the Tax Information Authority (International Tax Compliance) (Common Reporting Standard) Regulations (as revised) (“CRS Regulations”) and the International Tax Co-operation (Economic Substance) Act (as revised) (“ES Act”), which are available on the DITC website.
Upcoming Reporting Deadlines
- April 30, 2022 - File FATCA/ CRS information notice with the DITC via DITC portal for Financial Institutions that have 2021 as the first year of reporting.
- June 30, 2022 - File Fund Annual Return, Related Fund Entity Form and audited financial statements for mutual funds and private funds with a financial year end of December 31, 2021.
- July 31, 2022 - File annual report of Reportable Accounts for the 2021 reporting period for FATCA/ CRS compliance.
- September 15, 2022 – File CRS compliance form for the year ending December 31, 2021, reporting period due via DITC portal.
Recommended Fund Termination Deadlines
- September 1, 2022 – Strike-off application to be submitted to be dissolved by December 31, 2022.
- November 1, 2022 - Strike-off application to be submitted to avoid 2022 fees.
- December 31, 2022 – Fund are required to submit documentation to CIMA to have its status changed to License under Termination / Liquidation. Documentation must be filed by 31 December, 2022, in order for a Fund to qualify for a reduction in its 2023 annual CIMA fee.
