Cayman Guides On Compliance With CbC Reporting, FATCA, CRS

The Cayman Islands has released new guidance on the obligation on large multinational groups to file a country-by-country report in the territory and also an update on Common Reporting Standard and US Foreign Account Tax Compliance Act reporting.

CbC Reporting Guidance

The March 29 guidance from the Cayman Islands’ Department for International Tax Cooperation (DITC) came alongside the release of:

• The CbCR Notification Template (in CSV format);
• The Authorisation Letter Template; and
• The CbC XML Schema User Guide (Draft).

The guidance provides an overview of the OECD’s recommendations and of the Cayman law underpinning the CbC reporting regime (the Tax Information Authority Law (2017 Revision)), explains the obligation to notify which entity will file the CbC report, sets out the filing deadlines, how to complete the CbC report, and how the Cayman Islands intends to share the information required multilaterally.

CbC reporting requires multinational enterprises (MNE) that meet certain criteria to file a country-by-country report (CbC Report) with tax authorities. CbC reporting applies only to MNE groups with annual consolidated group revenue of not less than a specified threshold amount in the preceding fiscal year: in the Cayman Islands USD850m.

The CbC Report provides a breakdown of the amount of revenue, profits, taxes, and other indicators of economic activities for each tax jurisdiction in which the MNE group does business.

Notification Obligation – CbC Reporting

The notification deadlines with respect to Constituent Entities of an MNE Group are as follows:

• May 15, 2018, if the Reporting Entity is resident in the islands and the MNE Group’s fiscal year began on or after January 1, 2016, and ended on or before May 15, 2017; or
• September 30, 2018, if the Reporting Entity is not resident in the islands and the MNE Group’s fiscal year began on or after January 1, 2016, and ended on or before September 30, 2018.

Under the notification obligation, the reporting entity of an MNE Group with constituent entities resident in the islands must appoint the individuals who will be the “Primary Contact” and the “Secondary Contact” for those constituent entities. The Primary Contact may be an agent of the reporting entity. The Secondary Contact must be a fiduciary or management-level employee of the Reporting Entity. The Primary Contact and the Secondary Contact need not be resident in the islands.

As part of the notification obligation, the Primary Contact must create a single profile on the CbCR Profile for their MNE Group by completing a two-part notification process with respect to all the MNE Group’s constituent entities resident in the islands.

In part one, the Primary Contact must name the MNE Group, the ultimate parent entity, the surrogate parent entity (if any), provide contact information for the Primary Contact and the Secondary Contact, and upload the Reporting Entity’s Authorisation Letter appointing the Primary Contact and the Secondary Contact with respect to all the MNE Group’s Constituent Entities resident in the islands, which must be listed in the Schedule.

The DITC will review part one and then provide the Primary Contact with login credentials required for part two, including the DITC’s unique “CbCR ID” for the MNE Group. In Part 2, the Primary Contact must upload the CSV file, which lists all those constituent entities and include each constituent entity’s name, address, registration number issued by the General Registry (if applicable), type of entity, and FI number issued by the DITC (if a Cayman Financial Institution), and confirm whether or not it is regulated by the Cayman Islands Monetary Authority. The DITC says it will publish the prescribed templates for the Authorisation Letter and CSV file when it publishes the CbCR Guidance.

Filing Obligation – CbC Reporting

The Cayman Islands recently pushed forward the deadline for filing CbC reports. The deadline was March 31, 2018, for those groups with fiscal years beginning in 2016 between January 1 to March 31, 2016. It was then required within 12 months of the end of any fiscal year, for those fiscal years beginning after March 31, 2016. The Ministry of Financial Services and Home Affairs has now announced the following: “A Reporting Entity resident in the islands must make its first CbC Report by May 31, 2018, if the CbCR Regulations require it to make its first CbC Report on or before May 31, 2018.” This provides additional flexibility specifically for those whose fiscal period begins in the first five months of the year.

The Finance Ministry said a Reporting Entity resident in the Islands must make a CbC Report via the CbCR Portal even if that results in duplication because a CbC Report for the same MNE Group has already been made to another Competent Authority, for instance where the MNE Group appoints a Surrogate Parent Entity in another participating jurisdiction or where a Reporting Entity resident in the islands is also resident for tax purposes in another participating jurisdiction.

The CbC Report must be made via the CbCR Portal by uploading an XML file in the format prescribed by the OECD.

The CbC report is one element of a new three-tiered standardized approach to transfer pricing documentation proposed under BEPS Action 13. Under the framework, MNEs are required to provide aggregate information annually for each jurisdiction where they do business. It also covers information about which entities do business in a particular jurisdiction and the business activities each entity engages in.

FATCA and the CRS

In a separate announcement, the DITC announced that it has reopened the automatic exchange of information (AEOI) portal for notification and reporting in relation to the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS).

The deadlines are:

• April 30, 2018 for notification (i.e. enrollment); and
• May 31, 2018, for reporting for the 2017 calendar year.