Government launches FATCA portal

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. 

Duncan Nicol, the head of the Department of International Tax Cooperation, said the portal was the fourth step taken to comply with FATCA, following the necessary amendments to the Tax Information Authority Law, the issuance of regulations and the drafting of more than 200 pages of guidance notes by the joint ministry and private sector working group as a practical working tool.  

As such, the portal does not impose any new requirements on financial institutions, who have known the ground rules in terms of what type of information they have to collect for some time, Mr. Nicol said. 

“The portal is a mechanism for them to notify us that they have reporting obligations and it is a mechanism for them to deposit the data,” he said. 

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. 

New standard  

The portal is not Cayman’s first foray into the automatic exchange of tax information. Cayman has automatically reported interest income for EU citizens from Cayman Islands bank accounts under the EU Savings Tax Directive since 2005. However, the OECD’s common reporting standard and FATCA will collect much more taxpayer income data and they will be much wider than existing individual exchanges of tax information on request on the basis of bilateral agreements. 

“The common reporting standard will become the new global standard for the exchange of information for tax purposes. This does not mean that the method of exchange of information on request will cease in the future. But automatic exchange of information is the standard against which all jurisdictions will ultimately be assessed,” Mr. Nicol said.  

More than 90 countries have committed to implementing the new global standard and the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes will establish a peer review process to ensure the implementation of automatic tax information exchange.  

Last year, Cayman was one of 51 countries that signed the OECD Multilateral Competent Authority Agreement. The agreement activates the automatic exchange of information based on the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. 

Early adopters like the Cayman Islands have pledged to work toward launching their first information exchanges by September 2017. Others are expected to follow in 2018.

***Editor’s Note: This story was amended at 5:15 a.m. March 17 to correct the description of software firm Vizor.***

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  1. There is no excuse for this. The boundaries of the United States are the boundaries of the United states. Just because a Cayman resident citizen is classified under USA law to be a USA citizen does not entitle the USA government to tax the person; and the capital outflow will hurt the Caymanian economy. Let each bank decide whether to register and report, or face the heavy tax. Somebody will open a bank that deals only in Cayman dollars, and without the cost of FATCA compliance, that bank will offer better rates and beat the others. The FATCA-compliant banks will still be necessary, because they can do international USA-dollar transactions and guess what? The investor can move the money from that one to the new one by writing a cheque, which will clear the FATCA-exempt central bank.

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  2. US Citizens living abroad are allowed to VOTE in USA elections.
    And they are the ONLY citizens of any nation that are taxed on their citizenship, no matter where they live.

    Every other country only taxes people living in their country.

    A movement has been launched to help those USA citizens protest direct to their Congressman and demand changes to this grossly unfair law.

    Here is a link to it:

    http://www.connexionfrance.com/Americans-FATCA-bank-account-reporting-AARO-letters-16732-view-article.html

    They even provide a model letter to use.

    If you are an American citizen living in the Cayman Islands I recommend acting to fight back against the harsh consequences of this law.

    I also recommend forwarding the information to your American friends and family elsewhere in the world.

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  3. Actually Tom being a US citizen in Cayman does entitle the US to tax the person. That person may choose not to comply with the laws, but would eventually face heavy penalties for doing so.

    As to FATCA, it’s not compulsory for banks to register as you say. But since nearly every international fund transfer routes through the US, there would be penalties for not registering and no bank in its right mind is going to risk 30% penalties on any international transfer. True a bank could open and only do business in the Cayman Islands, why don’t you try that out and see how it works.

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  4. Christoph
    Over the years the laws of various countries have allowed all sorts of things.

    Including the owning of slaves in the USA and, in some countries today, women to be stoned to death for adultery.

    That does not make these acts any less abhorrent.

    Many Caymanians are in fact USA citizens. Not because they wanted to be but because they were born to Caymanian parents in a Florida hospital.

    These Caymanians went to school and have spent their entire lives in the Cayman Islands. But they are still, under this grossly unfair law, taxable as American citizens.

    And taxable on every dime they have ever earned in these tax-free islands.

    Time to revolt against the USA throwing its weight around.

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  5. There is a simple way that Caymanians and others can get past this, renounce your US citizenship.

    And I believe Somalia also taxes their citizens who live abroad, just like the US.

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  6. Norman,

    I’m not saying the law is fair or just, I’m just stating the fact of what the current situation is. It’s quite a stretch and an insult to compare slavery and abuse of women to screwy US tax laws. You are mistaken in one regard though. The US tax code provides for fairly generous exemptions on foreign income…currently near US 100k and up to more with certain other items, so Caymanians or other nationalities born in a US hospital aren’t taxed on every dime they have ever earned. Plus unless their parents apply for a US Social Security number and passport it’s extremely unlikely they’ll ever be tracked down for tax non-compliance. My statement about US citizen non-residents having to comply was aimed at expats, not birthright citizens who have never actually lived in the US.

    I’m in agreement that the US shouldn’t tax it’s non-resident citizens. Or at least shouldn’t require someone merely born on US soil to pay those taxes. There is an argument to be made that US expats should pay a small amount of US taxes past a certain amount of income to support national defense and all the other things Americans and the rest of the world take for granted.

    Still the facts of my statement stand. The laws are what they are and if you (or banks in this case) don’t want to comply they don’t have to do business in or with the US. Simple enough.

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  7. Christoph
    Of course Caymanians born in the USA can renounce their citizenship. But this is trickier than you think.

    And yes it would be hard for US tax authorities to hunt down those who never get a tax id. But these people would still be tax evaders in the eyes of the USA law.

    Luckily, as a UK citizen, I am just a bystander in this debate.

    It is my understanding that the origin of this USA tax system, where the government wanted to punish those people who left the country rather than fight against slavery. The law was intended to be temporary but was never repealed.

    Johnny
    I don’t think it’s Somalia but Eritrea. And I believe even they have stopped this practice. Either way it’s pretty sad to see the greatest democracy in the world lumped in with some nasty third world country.

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