Cayman Islands Issues CRS Enforcement Guidelines
April 5, 2022

Cayman Islands CRS penalties can be substantial

In late March of 2022, the Cayman Islands Tax Information Authority (“TIA”) released its Common Reporting Standard (“CRS”) Enforcement guidelines (“the Guidelines”). These guidelines provide the framework for the TIA to enforce the penalty provisions of CRS and are not legally binding on the TIA. The Guidelines apply only to administrative penalties and not criminal penalties.


The TIA may impose up to a $50,000 KYD penalty for offenses by a corporation or unincorporated Cayman Financial Institution and up to $20,000 KYD for offenses by other persons related to Part 3 of the Cayman Islands CRS regulations. $50,000 KYD is roughly exchanged for $60,000 USD as of the date of this tax alert. In certain cases, the TIA may also assess a $100 KYD per day continuation penalty.

The Guidelines provide that the TIA may impose a penalty for each offense and include multiple penalties in the same breach notice. The Guidelines provide examples of 4 different offenses related to the failure to establish and maintain written policies and procedures regarding CRS. Each offense has an indicative penalty of $7,500 KYD for certain entities. This could result in total penalties of $30,000 KYD (approx. $36k USD) related to CRS policies and procedures.


The Guidelines also provide indicative penalties of $37,500 KYD (approx. $45k USD) for failing to register on the DITC portal by the notification deadline and $5,000 KYD (approx. $6k USD) for EACH reportable account that was not submitted on a CRS return for certain entities.


Account holders preparing their self-certifications also need to be aware of Cayman Islands CRS penalties. Persons who provide a materially false self-certification may be subject to penalties up to $20,000 KYD (approx. $24k USD) and $8,000 KYD (approx. $10k USD) for certain entities and individuals, respectively. For purposes of this penalty, reasonable excuses do not include that (1) the self-certification was made outside of the Cayman Islands, (2) the person did not know or have reason to know that the self-certification was false, and (3) the self-certification was provided to a financial institution by someone other than the account holder.


Persons who received a breach notice from the TIA may be able to contest the penalty provided they prove that they had a reasonable excuse before the deadline set in the breach notice. Reasonable excuses do not include reliance on an agent or insufficient funds to comply with the CRS regulations. The TIA will not reconsider penalties if the person responds after the deadline indicated in the breach notice. A person who has received a penalty notice may appeal the penalty to a court.


Both financial institutions subject to Cayman Islands CRS regulations and account holders of financial institutions must timely and accurately comply with the Cayman Islands CRS regulations. The penalties outlined in the Guidelines can be substantial.


Do you have questions regarding CRS compliance? Contact International Capital Associates, LLC to discuss.

U.S.-Russia Tax Treaty Suspension

June 18, 2024
The U.S. Department of the Treasury announced on June 17, 2024, that the United States has formally notified the Russian Federation about the suspension of certain articles and provisions of the Convention between the United States of America and the Russian Federation for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital, signed at Washington, June 17, 1992. This suspension will take effect on August 16, 2024, and will continue until otherwise decided by the two governments. This decision is in response to the Russian Federation's notification on August 8, 2023, expressing its desire to suspend specific articles and provisions of the Convention and the Protocol. The announcement can be seen at United States’ Notification of Suspension, By Mutual Agreement, of the 1992 Tax Convention with Russia | U.S. Department of the Treasury . Taxpayers who rely on the U.S.-Russia income tax treaty should plan for this suspension. Please contact International Capital Associates, LLC if you need help planning for the treaty suspension or if you need other U.S. tax services .

U.S. Internal Revenue Service Releases Updated Form W-8EXP With Updates for Qualified Foreign Pension Funds

December 11, 2023
In November 2023, the U.S. Internal Revenue Service released an updated Form W-8EXP. The Form W-8EXP is a U.S. withholding tax certificate for foreign governments or other foreign organizations. Confusingly, the words “qualified foreign pension fund” do not appear on the Form W-8EXP. However, the updates to the Form W-8EXP are intended to allow a non-U.S. pension fund (or qualifying entity) to certify its Qualified Foreign Pension Fund status. A non-U.S. pension fund may certify that it is a “Withholding Qualified Holder Under Section 1445” provided it meets the requirements of Section 897(l) and Treas. Reg. 1.897(l)-1 as a Qualified Foreign Pension Fund. A “Qualified Holder” includes certain wholly-owned entities that meet the requirements of Treas. Reg. 1.897(l)-1(d)(2) or (3). A “Withholding Qualified Holder” also consists of a non-U.S. partnership wholly owned by Qualified Holders. Unfortunately, Form W-8EXP still does not contain sections to allow the taxpayer to claim the benefits of a U.S. income tax treaty. Non-U.S. pension funds and governments will still need to complete Form W-8BEN-E to claim U.S. income tax treaty benefits with a U.S. withholding agent, such as reduced dividend and interest withholding rates. The release of the updated Form W-8EXP does not invalidate any prior Qualified Foreign Pension Funds certifications. In the future, U.S. withholding agents may request a valid Form W-8EXP instead of other Qualified Foreign Pension Fund certifications. A Withholding Qualified Holder should ensure that the Form W-8EXP is complete and valid to make a Qualified Foreign Pension Fund certification using the Form W-8EXP. Please contact International Capital Associates, LLC if you need help determining if the entity is considered a Withholding Qualified Holder, if you need assistance completing Form W-8EXP , or if you need other U.S. tax services .