In an Industry Advisory dated 20 December 2017 the Cayman Islands (‘Cayman’) the Department of International Tax Cooperation (‘DITC’) published a high level summary of The Tax Information Authority (International Tax Compliance) (Country-By-Country Reporting) Regulations, 2017 (‘the Regulations’) published in the Gazette on 15 December 2017.
What are the regulations about?
The Regulations relate to Country by Country Regulations (‘CbCR’) which apply to Multinational Enterprises (‘MNEs’) and/or their constituent entities (‘CE’s). Cayman is a member of the Inclusive Framework on Base Erosion and Profit Shifting (‘BEPS’)set up by the Organisation for Economic Co-operation and Development (‘OECD’) and the G20 and which is designed to create a single set of consensus-based international tax rules to protect tax bases while offering increased certainty and predictability to taxpayers. All OECD and G20 countries have agreed to CbCR, one of the BEPS minimum standards (‘actions’). (See also the relevant guidance).
So who do they affect?
CbCR applies to MNE Groups. An MNE Group is a collection of two or more CEs whose tax residence is in different jurisdictions but related through ownership or control, which would be expected to prepare consolidated financial statements, including an enterprise resident for tax in one jurisdiction and subject to tax with respect to business carried out by a permanent establishment in another jurisdiction. The MNE Group must also have had a total consolidated group revenue of at least US$850m in the preceding Fiscal Year. Under the Regulations an MNE Group with a lower group revenue is an Excluded MNE Group.
How does that affect Cayman CEs?
Any Cayman resident CE must notify the DITC that it is a member of an MNE Group. An entity is resident in Cayman if it is incorporated or established in Cayman, has a place of effective management in Cayman or is subject to financial supervision in Cayman. If it is not the CE of the MNE Group designated as the Reporting Entity (the CE which provides the CbCR) it must also confirm the name and jurisdiction of the CE which is (for example the CE’s ultimate or surrogate parent entity).
What is the deadline for DITC notification?
The Industry Advisory advises that the first fiscal year for CbCR purposes is the one which began during 2016. The deadline for notification in respect of fiscal years which began from 1 January to 31 March 2016 is given as 31 March 2018. Any entity which becomes a CE after that date must notify the DITC before the end of its fiscal year. The example given is that where the fiscal year began on 1 February 2016 the CbC report must be filed with the DTIC by 31 March 2018, but where the fiscal year began on 1 May 2016 the deadline would be 30 April 2019.
What if the Cayman CE is the Reporting Entity?
If a Cayman resident CE is the MNE Group’s Reporting Entity, must file a CbC Report. The Schedule to the Regulations includes the standard template and instructions and the report must be in the form of the CbCR xml Schema. The Industry Advisory recommends that a Reporting Entity which is required to file a CbC Report in 2018 should start preparing it as soon as practicable. More information is available on Cayman CbCR legislation and resources on the DITC website.
If you would like advice or assistance on the Regulations, on any international information exchange agreements and reporting or on other regulatory matters contact us on firstname.lastname@example.org to see how we can help.
The information contained in this article is necessarily brief and general in nature and does not constitute legal advice. Appropriate legal or other professional advice should be sought for any specific matter.