The Cayman Islands Department for International Tax Cooperation has launched an Automatic Exchange of Information portal that allows Cayman’s financial institutions to register and report customer data under the U.S. Foreign Account Tax Compliance Act.
FATCA is a U.S. tax-reporting initiative that forces financial institutions and certain nonfinancial entities worldwide to report bank accounts and ownership interests of U.S. taxpayers or face a 30 percent withholding tax on transactions with the United States.
In December 2013, Cayman signed a FATCA Model 1 intergovernmental agreement with the U.S. which stipulates that entities in Cayman report this information to the Cayman Islands government rather than send it directly to the Internal Revenue Service. The government developed the new website to receive and collect the data from local institutions and then transfer the records to the IRS.
The portal will also enable the filing of tax information in relation to the U.K.’s version of FATCA beginning in 2016 and to other countries that have signed up to the OECD’s Multilateral Convention on Mutual Administrative Assistance in Tax Matters and its common reporting standard from 2017.
Minister for Financial Services Wayne Panton said the multilateral exchange of tax information is now a global standard. “It is not one that Cayman is simply adopting on its own initiative.
“Cayman as a player in the world’s financial architecture needs to meet global standards and comply with global obligations. That’s why the launch of this portal is very important to us. We can safely say that we are ready.”
Cayman’s significant role in the international financial system “is evidenced by the fact that we have the highest number of financial institutions that are registered with the IRS under U.S. FATCA,” Minister Panton added.
A total of 28,559 financial institutions registered under FATCA come from Cayman, according to an IRS online database. This means Cayman’s finance industry represents 18.27 percent, or nearly one fifth, of all registered reporting institutions under the U.S. law.
Reporting institutions under FATCA first have to register with the IRS and obtain a Global Intermediary Identification Number before they can register with the new portal and upload their U.S. customer or client data.
The portal, which can be accessed through a link on the Department for Tax Cooperation website, was developed by Deloitte Cayman in cooperation with KirkISS, software firm Vizor (an Irish company with offices in Dublin, Ireland as well as in Ottawa, Canada and Dubai, UAE) and government’s computer services department.
Minister Panton said government had allocated $1.5 million for the development of the portal and that with certain future ancillary costs the project will come in on budget.
“This is simply the cost of doing business,” he said.
By Courtesy of CompassCayman
