Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS)

FATCA (enacted 2010; effective from 1 July 2014) targets offshore tax abuse by requiring Foreign Financial Institutions (FFIs) to identify and report U.S. accounts and certain ownership of passive NFFEs. Non-compliance can trigger 30% withholding on U.S.-source with holdable payments (e.g., interest, dividends). Model 1 IGA jurisdictions (such as Cayman and BVI) report to their local authorities, which exchange with the IRS; FFIs also typically register for a GIIN to appear on the monthly IRS FFI list used by withholding agents. Form 8966 and the FATCA XML Schema v2.0 underpin electronic reporting and corrections.

Withholding scope (today): FATCA withholding remains focused on U.S.-source FDAP income. Proposed rules eliminated gross proceeds withholding and continue to defer any “foreign passthru payment” withholding; FFIs rely on GIIN status to avoid FATCA withholding by counterparties.

Key data reported on Form 8966: account holder details (or substantial U.S. owners), account number, year-end balance/value, and gross amounts of interest, dividends, other income, and (where required) gross proceeds/redemptions.

CRS (OECD, 2014; now “CRS 2.0” as amended in 2022 and supported by 2024 XML schema updates) is the global standard for annual automatic exchange of financial account information among participating jurisdictions. RFIs identify tax residency via self-certifications (reasonableness test applies) and report to their local authority using the CRS schema. The 2024 Amended CRS XML schema/user guide (v4.0) and 2025 status-message schema enhance data quality and error handling between authorities.

Due diligence highlights: no general individual de-minimis thresholds (unlike FATCA preexisting account thresholds in many IGAs); enhanced review for high-value preexisting accounts; strict self-cert reasonableness and TIN capture rules (reasonable efforts by end of the second calendar year for preexisting accounts).

What gets reported under CRS: name, address, TIN(s)/date of birth, account number, year-end balance/value, and income categories (e.g., interest, dividends, gross proceeds from financial assets, certain insurance income).

• Cayman (DITC Portal): One-off FATCA/CRS registration; appoint a Principal Point of Contact (PPoC) and Authorising Person (AP). A Letter of Authorisation is required when AP/PPoC are not CIMA-licensed entities. The PPoC (or Secondary Users) files returns, Nil declarations, and the CRS Compliance Form.

• BVI (BVIFARS): Enrol on the ITA’s BVIFARS for FATCA/CRS. 2025 updates added a payment module and new CRS Additional Information Form.

• Cayman (reporting for 2024 year):

  • CRS XML & CRS Filing Declaration (Nil returns mandatory): 31 July 2025

  • FATCA XML (reportable or optional Nil): 31 July 2025

  • CRS Compliance Form (all FIs with a CRS obligation): 15 September 2025.

• BVI (reporting for 2024 year):

  • CRS Notification (new RFIs): 30 April 2025

  • FATCA/CRS XML submission (including CRS Nil as applicable): 31 May 2025

  • New annual CRS Additional Information Form (for reporting & non-reporting FIs): due within 9 months of financial period end—first filing: on/before 30 September 2025 for 31 Dec 2024 year-ends.

• Model 1 IGAs: Cayman and BVI each operate under FATCA Model 1 IGAs (local reporting to DITC/ITA). GIIN registration remains expected by counterparties and for appearing on the IRS FFI list.

• CRS RFIs vs. Non-Reporting FIs: Governmental entities, international organisations, central banks, and qualifying retirement funds may be Non-Reporting (low-risk) if conditions are met; otherwise classify as Depository, Custodial, Investment Entity, or Specified Insurance Company.

• Excluded Accounts (CRS): retirement/pension, certain tax-favoured or escrow/estate/term-life accounts meeting Section VIII C(17) conditions.

• Self-certifications & reasonableness test (for new and entity accounts; look-through to Controlling Persons of Passive NFEs). Reasonable efforts to obtain missing TIN/DOB for preexisting reportables by end of the second following year.

• Controlling Persons thresholds: Cayman guidance references 10% for companies/partnerships, 25% for trusts’ discretionary beneficiaries (as applicable). Always follow local AML/CRS guidance.

• FATCA de-minimis (preexisting accounts): Many Model 1 IGAs allow thresholds (e.g., $50k individuals; $250k entities) at the FFI’s election—contrast with CRS (no general de-minimis for individuals).

• CRS Compliance Form: mandatory annually; failure to submit by the deadline automatically triggers an administrative penalty. DITC’s Enforcement Guidelines detail penalty criteria, continuing penalties, payment mechanics and appeal rights.

• Indicative penalty levels for offences (e.g., failure to register, lack of written policies) have been publicised in legal updates; current practice includes targeted DITC reviews and audits.

• CRS XML: use the OECD Amended CRS XML Schema and user guide (updated 2024; “CRS 2.0” fields), plus 2025 status-message schemas enabling error feedback between authorities.

• FATCA XML (Form 8966): IRS FATCA XML Schema v2.0; IRS has current guidance on corrections/voids, DocRefId standards, and best practices (characters, validations).

• Status mapping: FATCA (PFFI/RDCFFI/Reporting Model 1 FI/Direct Reporting NFFE) and CRS (RFI vs. Non-Reporting FI), with written rationales and organisational diagrams.

• GIIN lifecycle: IRS FATCA registration, GIIN issuance and inclusion on the monthly FFI List used by counterparties; calendar holds for periodic certifications and account updates.

• Portal onboarding:

  • Cayman — DITC Portal setup, AP/PPoC appointments, Letter of Authorisation (where needed), Secondary Users, deactivation protocols.

  • BVI — BVIFARS enrolment, user roles, and payment module setup.

• Self-cert kits for individuals/entities (OECD templates tailored), reasonableness checklists, and AML/KYC tie-outs.

• TIN/DOB capture controls to meet “reasonable efforts” deadlines for preexisting accounts.

• CRS vs FATCA playbooks: treatment of controlling persons, Passive NFE look-through, and optional FATCA de-minimis elections for legacy accounts (if permitted locally).

• Remediation sprints for preexisting accounts (high-value review, indicia sweeps, RM queries).

• Evidence packs aligned to local expectations (salary/rent benchmarks not relevant here, but detailed KYC, residency proofs, tax IDs, relationship manager notes, and supporting documentation for “reasonableness”).

• Cayman 2025 run-book: ensure CRS XML and CRS Filing Declaration (Nil) by 31 Jul 2025; CRS Compliance Form by 15 Sep 2025; FATCA XML (or optional Nil) by 31 Jul 2025; support for corrections, DocRefId hygiene, and status messages.

• BVI 2025 run-book: FATCA/CRS returns by 31 May 2025; complete the new CRS Additional Information Form by 30 Sep 2025 (first cycle), with annual nine-month cadence thereafter; manage BVIFARS payment module.

• XML & quality control: adopt the OECD Amended CRS XML schema and IRS FATCA XML guidance/best practices; handle corrections/voids; maintain audit trails and submission receipts.

• Enforcement-readiness: Cayman CRS Enforcement Guidelines (penalties, continuing fines, appeals) and DITC audit trends; BVI offences and fine levels.

• Schema evolution: CRS 2.0 changes and status-message schemas; CARF interactions where relevant to crypto-asset exposures.

• Counterparty assurance: GIIN/FFI-list monitoring and W-8/W-9 refresh cycles to reduce withholding risk under Chapter 4.