Background to the CRS
In 2014, the Cayman Islands was among 50 other jurisdictions which signed a Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information demonstrating its commitment to implement the Common Reporting Standard (the CRS), an international regime developed by the Organisation for Economic Co-operation and Development (the OECD) to facilitate and standardise the exchange of information on residents' assets and income, primarily for taxation purposes. As at the date of this advisory, over 120 jurisdictions have agreed to implement the CRS.
This agreement was implemented in the Cayman Islands in 2015 in the form of the Tax Information Authority (International Tax Compliance) (Common Reporting Standard) Regulations, now in their 2021 Revision (the Regulations). All Cayman Islands Financial Institutions (FIs), as defined in the Regulations, must comply with the Regulations and the CRS Guidelines issued by the Cayman Islands Tax Information Authority (the TIA). The TIA's delegated functions in relation to the CRS are carried out by the Department of International Tax Co-operation (the DITC).
A Cayman Islands entity will be a FI if it is either a 'Depository Institution', a 'Custodial Institution', a 'Specified Insurance Company' or an 'Investment Entity' (as such terms are defined in the Regulations).
The CRS imposes similar reporting and other obligations to the US Foreign Account Tax Compliance Act regime (the FATCA), which has also been implemented in the Cayman Islands.
Current obligations
A Cayman Islands that is a FI for CRS purposes has to register with the DITC as a FI. In addition, if it is a reporting FI for CRS purposes (Reporting FI), its obligations include:
- maintaining written CRS policies and procedures;
- submitting an annual CRS return with 'Account Holder' (e.g. investor) information obtained through CRS due diligence self-certification forms; and
- submitting an annual CRS Compliance Form.
To assist with satisfying these obligations, a FI is also required to appoint a Principal Point of Contact (PPOC) and Authorising Person for liaising with the TIA and the DITC.
Updates to the CRS in February 2020 extended the persons who could be PPOC and Authorising Person on behalf of a FI to entities, as well as individuals. The PPOC and Authorising Person may also be the same person in circumstances where a FI elects to appoint an entity which is licensed by the Cayman Islands Monetary Authority.
Many FIs, in particular Reporting FIs, have outsourced the PPOC and Authorising Person function to third-party service providers as is permitted under the Regulations.
Background to the updates to the CRS
Following the OECD's review of the CRS, the OECD published significant amendments to the CRS in June 2023. These amendments were aimed at improving the operation of the CRS, taking into account Reporting FIs' practical experience and the expectations of international tax authorities. The amendments also responded to developments in the digital and electronic economy, in particular in relation to crypto-assets which were not catered for under the existing CRS reporting framework.
To ensure that international commitments are adhered to, the Global Forum on Transparency and Exchange of Information for Tax Purposes is charged with conducting peer reviews to assess jurisdictions' legislative frameworks and the effective implementation of the CRS in practice. To support positive outcomes of the next peer review process, the Cayman Islands is implementing certain amendments to the Regulations through the Tax Information Authority (International Tax Compliance) (Common Reporting Standard) (Amendment) Regulations, 2025 (the Amendment). With the exception of certain amendments coming into force on 1 January 2027, the Amendment is due to come into force on 1 January 2026.
The Amendment aims to strengthen the existing Regulations by ensuring they conform with the OECD's updated international standard. The Amendment is also complementary to the implementation of the new Crypto Asset Reporting Framework (CARF) for which legislation is also being developed. We have issued a separate advisory on the application of CARF and its implications which can be found here: How will the OECDs Crypto Asset Reporting Framework impact your business
Updates to the CRS
There are a number of changes set out in the Amendment which aim to implement the OECD's 2023 amendments to the CRS.
These changes include expanding the definition of 'Financial Assets' to include crypto-assets and bringing certain electronic money products and central bank digital currencies into scope, with new definitions of 'Depositary Institution', 'Specified Electronic Money Products', 'Central Bank Digital Currencies', 'Crypto-Assets', 'Relevant Crypto-Assets', 'Exchange Transactions' and 'Fiat Currency'. While most 'Crypto Asset Service Providers' will be captured by the CARF rather than the CRS, others, such as crypto-asset custodians, will be captured by the CRS.
The Amendment also aims to improve the CRS due diligence procedures and reporting outcomes, as set out in the OECD's 2023 amendments to the CRS, including by:
- bringing forward the deadline by which a FI must register with the DITC from 30 April to 31 January for entities established from 2026, with the new deadline first taking effect on 31 January 2027. For entities that become FIs in 2025, the registration deadline shall remain 30 April 2026;
- bringing forward the deadlines for Reporting FIs to submit the CRS annual return and CRS Compliance Form from 31 July and 15 September, respectively, to 30 June each year. This will take effect in respect of the 2026 reporting period, for which filing will be due by 30 June 2027;
- requiring that the PPOC is resident in the Cayman Islands. For FIs registered prior to 1 January 2026, any necessary change to a PPOC resident in the Cayman Islands must take place and be notified to the DITC by 31 January 2027;
- requiring Reporting FIs collect and report certain additional information, such as the role of controlling persons, whether an account is a 'New Account' or 'Pre-Existing Account' (as defined under the CRS), and the type of account (including if it is a joint account); and
- requiring a specific form of CRS self-certification is used as part of Account Holder due diligence for CRS purposes to assist in capturing the information referred to above.
Practical considerations
Reporting FIs will need to update their internal processes or liaise with any CRS service providers to ensure processes are adequately reviewed and updated to take account of these new rules, including the requirements around valid self-certifications and the new deadlines. Where your Reporting FI has instructed Walkers Professional Services (WPS) to assist with the Reporting FI's CRS requirements, WPS will handle this and will reach out to the Reporting FI in due course.
FIs that currently engage service providers outside of the Cayman Islands should also revisit their arrangements to ensure that the PPOC is resident in the Cayman Islands. WPS, and its employees, are resident in the Cayman Islands and can assist as required, including with the provision of the PPOC and Authorising Person.
Boards and relevant staff should consider training to ensure the key obligations are understood and that any delegations can thereby be adequately monitored and supervised.
Contacts
We have a dedicated global Regulatory & Risk Advisory practice group of regulatory lawyers that can offer legal and practical advice, documentation and training in connection with all FATCA, CRS and CARF aspects. Through our affiliate, WPS, we are also committed to providing FATCA, CRS and CARF solutions that will enable all clients subject to the regime to satisfy the necessary requirements, including the new updates set out in the Amendment.
For further information please speak with your usual Walkers contact.
