Private equity and venture capital firms with investment activities tied to the Cayman Islands may want to take note of reporting updates and deadline changes. Recent activity around requests from the European Union (EU) for more Cayman Island reporting transparency may add a reporting requirement for investment vehicles domiciled in the Cayman Islands that are subject to the Common Reporting Standard (CRS). Deadlines for 2019 CRS and Foreign Account Tax Compliance Act (FATCA) returns have also been modified in response to the disruption caused by the COVID-19 pandemic.
Compliance with the Common Reporting Standard
PE/VC firms with Cayman Island domiciled investment vehicles may have found themselves with new registration requirements with the Cayman Islands Monetary Authority for their 2019 reporting year due to changes the Cayman Islands made to comply with the EU’s request for more transparency (see our earlier coverage here).
Further, to demonstrate CRS and FATCA compliance, investment vehicles that qualify as reporting financial institutions (FI) typically register with, and annually report to, the Cayman Islands’ Tax Information Authority (TIA). In addition to this, the TIA is now requesting an FI produce an annual CRS Compliance Form. The due date of the Compliance Form will be Dec. 31, 2020 for the initial 2019 tax year. Tax years thereafter are anticipating a due date of September 15. Separately, CRS and FATCA reporting for the 2019 tax year has been extended until November (more on that below). The longer window for the Compliance Form is designed to allow the reporting FI more time to gather the necessary information to fulfill the requirement. Information about the Compliance Form can be found here, while the form itself can be accessed here.
FATCA & CRS Extension
In response to the COVID-19 pandemic, the Cayman Islands is extending its FATCA and CRS reporting deadlines for the 2019 tax year to Nov. 16, 2020. Reporting deadlines for the CRS and FATCA had already been adjusted prior to the COVID-19 pandemic pursuant to the TIA announcing changes to its portal that wouldn’t be operational until June 2020. The TIA’s most recent FATCA due date extension was in response to the IRS announcing that the FATCA reporting requirement for Model 1 IGA jurisdictions (which includes the Cayman Islands) would be extended to Dec. 31, 2020 to accommodate the impact of the COVID-19 pandemic. The new November 16 due date for the Cayman Islands FATCA submissions is intended to allow the TIA time to remit the information to the U.S. Treasury. The TIA then further granted CRS the November 16 extension, thereby aligning the timeline for the two regimes.
In summary: the Cayman Islands have bumped the original due date for the 2019 tax year from May 31, 2020 to Sept. 18, 2020, now to Nov. 16, 2020 and finally, have established that for future tax years, the due date will be July 31.
Monitoring Other Deadlines
To the extent your firm has obligations in other jurisdictions, your organization should be prepared for varying changes to its FATCA/CRS reporting deadlines. There are over 100 countries participating in FATCA and CRS, each with their own extension considerations due to the COVID-19 pandemic. Some countries, like the United Kingdom, are not issuing a formal extension but offering leniency where a COVID-19 pandemic related hardship is a reasonable cause for late filing. Other countries, including Canada and the British Virgin Islands, are extending their deadlines to various dates (Canada from May 1 to Sept. 1, 2020, British Virgin Islands from May 31 to June 30, 2020). Still others like Guernsey have advised they do not anticipate extending deadlines at all.
For More Information
For more information about how the COVID-19 pandemic affects your firm, please contact us.
Heather Brown is a Tax Director in New England and a member of the Private Equity & Venture Capital Practice. She can be reached at firstname.lastname@example.org or 401.626.3274.
Tracy Dalpe is a Tax Director in New England and a member of the Private Equity & Venture Capital Practice. She can be reached at email@example.com or 401.626.3210.
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