On January 1, 2026, amendments to the Common Reporting Standard (“CRS”) will go into effect in Cayman Islands, implementing changes published by the Organisation for Economic Co-Operation and Development (“OECD”) in 2023 (“CRS Amendments”). These changes impact Cayman Financial Institutions, including private funds domiciled in Cayman Islands, and relate to numerous aspects of the regulation, including registration, due diligence requirements, reporting requirements and timelines, and service provider selection. Further, consistent with the trend of increased regulation for digital assets, they will also incorporate crypto assets within the scope of CRS by expanding the definition of ‘Financial Assets’ to include them.
CRS was developed by the OECD and calls on jurisdictions to increase global tax transparency by obtaining information from their financial institutions and automatically exchanging that information with other jurisdictions on an annual basis. Since its adoption, CRS has been implemented worldwide by 100 jurisdictions, including Cayman Islands, enabling participating jurisdictions to enhance tax compliance by fostering international tax co-operation.
With regard to the CRS Amendments, the Cayman Islands Ministry of Financial Services and Commerce (the “Ministry”) has stated that their overarching goal is to ensure that local regulation conforms to the OECD’s updated international standards and puts Cayman Islands in a good position to obtain successful results in any future peer review of its legislation and practical administration of CRS. Specifically, their objectives include enhancing definitions to avoid misunderstandings by entities subject to CRS, clarifying reporting and due diligence requirements, and revising provisions related to enforcement which will bolster the Tax Information Authority’s ability to enforce the CRS regulations and improve compliance.
A topical summary of the changes effected by the CRS Amendments is set forth below:
Financial institutions, including Cayman Islands private funds, will want to review their CRS procedures and speak with their service providers serving as PPOC and/or providing CRS account due diligence to confirm they understand the CRS Amendments and are prepared to comply with all applicable changes. Most importantly – First, funds should seek to gain comfort that all new account due diligence will be conducted in consideration of the expanded due diligence and reporting data requirements as of January 1, 2026, and that a remediation of account due diligence that occurred prior to that date will be undertaken if necessary. Second, funds should be sure that their PPOC service provider meets the Cayman Islands resident requirement, and, if not, be prepared to make the necessary switch to one who does.