Compliance services

U.S. tax filing requirements can be very challenging to identify and complete, especially with foreign investments. We are experts in preparing the essential forms and tax returns, ensuring you meet the legal compliance requirements on time and in full. Funds that have U.S. investments or have U.S. investor reporting obligations must report income under U.S. federal income tax principals, as well as reporting results to the Internal Revenue Service and investors.

David Conen

Head of Tax

KPMG in the Cayman Islands

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KPMG has developed a number of services in order to assist Cayman and BVI Financial Institutions with the new issues of CRS and U.S. FATCA, including:

Schedule K-1s

Funds classified as partnerships for U.S. tax purposes may need to provide tax reporting to U.S. investors, as well as non-U.S. vehicles that have direct or indirect U.S. investors.
Passive Foreign Investment Company (PFIC) statements

Funds classified as corporate entities for U.S. tax purposes may need to provide PFIC statements to their investors.
Income tax returns

Funds organized under U.S. law, or deriving income from U.S. sources are required to file U.S. income tax returns.
Withholding tax returns

Funds which receive U.S. source income may be required to file U.S. withholding tax returns and comply with withholding U.S. tax deposit requirements.
State requirements

Funds that have U.S. investments in businesses located, or investors resident in certain States, may be required to file tax returns in those locations. We can help identify any State filing obligations of the Fund.

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Typical tax structures

Let us take the time to review every angle of your tax requirements to give you the insight you need.

Initial formation funds face a daunting array of US tax considerations when starting operations, from information disclosure considerations, to structuring concerns, to investor servicing issues. Certain US tax elections must be made within a limited timeframe once operations begin. KPMG can assist with the following areas that a Fund will commonly run into:

Review of proposed structure to identify potential US and foreign tax issues for the Fund or its investors, and consideration of applicable US tax elections.
Drafting or review of US tax section of Offering Memorandums.
Review of partnership agreements to verify compliance with US tax requirements.
Reviewing and commenting on investor side letters.
Preparation of US entity classification (“check-the-box”) elections, and other first-year elections.

Investment managers often face their own US tax issues where they have operations in the US (either through branches or affiliated companies) or have personnel deployed in the US , or traveling regularly to the US to perform certain services. KPMG can assist companies in assessing whether any of their US activities may expose them to tax in the US, and whether companies may have any US filing requirements.

Often times a Fund will engage in a transaction that will impact the tax consequences of its US investors, whether the Fund is a flow-through entity or a corporation for US tax purposes. Reviewing the US tax consequences of these transactions before they occur can often provide an opportunity to structure the transaction in the most tax-efficient manner. KPMG can assist with these common analyses, and many more.

Acquisitions

KPMG can assist with reviewing potential acquisitions to determine the optimal structure to achieve low withholding tax on cross-border payments, while also ensuring that US investors in the Fund are not unduly burdened with phantom income for US tax purposes, as may occur with investments in certain debt and preferred stock.

PFIC/CFC Analysis

The US controlled foreign corporation (“CFC”) and passive foreign investment company (“PFIC”) rules are complex, and often catch a broad range of companies, even those companies that have active operations. The PFIC rules operate to either tax the US investors on the current income of a PFIC, or provide an onerous tax charge to US investors on dividends or dispositions. KPMG can assist by reviewing investments to determine whether they may be classified as PFICs or CFCs, and determine whether there may be any alternative structuring considerations.

Exit and Refinancing

Minimizing tax charges to US investors upon an exit or refinancing is a common objective for Funds. In the case of exit or refinancing of a US investment, the Fund itself may be subject to certain US withholding tax and/or return filing requirements. KPMG can assist with structuring a potential exit or refinancing and assessing the US tax costs to investors (and the Fund if applicable).

Principles for a responsible tax practice

Our Principles for a Responsible Tax Practice bring to life KPMG’s values and our Global Code of Conduct in a way that is meaningful for the every day situations we face as tax professionals.

We act lawfully and with integrity and expect the same from our people, member firm clients, tax authorities and other parties with whom we interact.
We provide tax advice to member firm clients to allow them to pursue their commercial objectives, respecting the needs of our people and the communities in which we operate.
We maintain objectivity by seeking the facts and providing insight, consistent with our professional duties, in providing tax services to member firm clients.
We support a relationship with tax authorities, based upon mutual trust and respect, which enables constructive dialogue and responsiveness by all parties, in order to fulfill our responsibilities to member firm clients.

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