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Posted by Tracy Dalpe on Apr 19, 2022 4:01:43 PM

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Many private equity (PE) and venture capital (VC) firms have organized fund entities in non-U.S. jurisdictions, such as the Cayman Islands. As such, the analysis and reporting from a Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standards (CRS) perspective continues to be an important part of overall tax compliance for these firms. PE/VC firms with funds organized in the Cayman Islands will want to take note of recent updates made to the Cayman Islands Department for International Tax Cooperation (DITC) portal, as well as key upcoming compliance dates.

On Feb. 7, 2022, the DITC provided updates related to the deactivation of a financial institution (FI) on the portal along with technical changes made in an effort to make it easier to resubmit CRS information after making corrections. This DITC also issued details on the new jurisdictions now participating in CRS, as well as one that has been removed.

Deactivation of Financial Institutions

A PE/VC firm with an FI that is no longer in existence or that is no longer classified as a Cayman Reporting FI has the ability to deactivate them from the DITC Portal. The Principal Point of Contact (PPoC) would need to fill out a form to request deactivation of the FI. The DITC Portal User Guide now includes guidance on pages 24-25 on how to fill out the form. Please note: all reporting obligations of the FI must be completed before the PPoC submits the form to deactivate the entity. These obligations include a CRS Return (if applicable), CRS Filing and Declaration, and a CRS Compliance Form for each year the FI had reporting obligations.

CRS Reporting Correction Process

This technical change relates to a PE/VC firm that is submitting CRS information because one or more of the Account Reports need to be corrected or deleted however, the Reporting FI remains the same and has not changed. The DITC has updated these validation rules in order to be better aligned with the Organisation for Economic Co-Operation and Development’s (OECD’s) CRS User Guide. The DITC Portal User Guide now includes guidance on pages 29-31 on how to submit corrections and deletions of CRS data.

2021 CRS Reportable Jurisdictions

The DITC on Jan. 31, 2022 issued an updated list of the CRS Reportable Jurisdictions. For the 2021 Reporting Period (reports due in 2022), Jamaica, Kenya, and Morocco were added and Kuwait has been removed from the Reportable Jurisdictions. PE/VC firms should continue to review this list of CRS Reportable Jurisdictions to ensure they are reporting, where necessary, on behalf of all their non-U.S. investor base.

Key Compliance Dates

  • July 31, 2022: CRS and FATCA reporting for all FIs
  • Sept. 1, 2022: Date by which strike off application must be submitted for an entity to be dissolved on Dec. 31, 2022
  • Sept. 15, 2022: CRS Compliance Form for the year ending Dec. 31, 2022

The updated guidance reduces the burden of certain compliance processes for Cayman Islands FIs. FATCA and CRS compliance and reporting remain complex, particularly for PE/VC firms operating in multiple jurisdictions outside of the U.S.

For comments, questions, or concerns about your firm’s reporting, please contact a member of our team.

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Tracy-Dalpe-Web-4x6Tracy Dalpe is a Tax Managing Director in New England and a member of the Private Equity & Venture Capital Practice. She can be reached at tdalpe@cbiz.com or 401.626.3210.

 

 

 

© Copyright 2022 CBIZ, Inc. and MHM. All rights reserved. Use of the material contained herein without the express written consent of the firms is prohibited by law. This publication is distributed with the understanding that CBIZ is not rendering legal, accounting or other professional advice. The reader is advised to contact a tax professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

Tags: Private Equity & Venture Capital, PE/VC

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