Cayman Islands signs FATCA agreement with US

On 29 November, the US and the Cayman Islands signed a ‘Model 1’ intergovernmental agreement (IGA) on the Foreign Account Tax Compliance Act (FATCA). The US considers this IGA already to be in effect, despite the need for implementing measures in the Cayman Islands.

This IGA is the second such agreement with a country that is neither an Organisation for Economic Co-operation and Development (OECD) member nor signatory to an income tax treaty with the US; Costa Rica signed an IGA on 26 November. It is the first non-reciprocal IGA, meaning that US financial institutions are not obliged to report information about their Cayman Islands account holders to the Internal Revenue Service (IRS) for automatic exchange with the Cayman Islands.

This is the 12th IGA overall that the US has signed, which noted that it had reached ‘agreements in substance’ on FATCA with 16 other countries. The signing of this IGA should be welcomed by those private investment fund sponsors who form Cayman entities to make investments in US markets…

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