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Cayman Eases Deadline For CbC Reporting

by Jason Gorringe, Tax-News.com, London

14 February 2018


Authorities in the Cayman Islands have pushed back the deadline for notifying local authorities of which entity will file a country-by-country (CbC) report, and for filing the first reports.

The extensions were announced on February 2, 2018, alongside confirmation that in early March 2018 CbC reporting guidance will be released and the Cayman CbC reporting portal will be launched.

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 Department for International Cooperation (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.

The Ministry of Financial Services and Home Affairs has said the notification deadlines with respect to constituent entities of an MNE Group with respect to its fiscal year beginning on or after January 1, 2016, are newly as follows: May 15, 2018, if the Reporting Entity is resident in the islands; or September 30, 2018, if the Reporting Entity is not resident in the islands.

The announcement also includes a change to the filing date for the first CbC reports, which cover fiscal years beginning on or after January 1, 2016. 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 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 Ministry said.

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

The Ministry concluded that the following mechanisms are in place for non-compliance: a penalty for failure to comply with CbC filing requirements; a daily default penalty; and penalties for inaccurate information. Any Constituent Entity of a MNE Group that is resident in the Cayman Islands is obligated to keep records of the information related to CbC for six years and to make the information available to Tax Information Authority for inspection within a specified time frame. Failure to comply constitutes an offense liable to a fine or imprisonment, the Ministry concluded.

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, relating to the global allocation of income and taxes paid, together with other indicators of the location of economic activity within the MNE group. It also covers information about which entities do business in a particular jurisdiction and the business activities each entity engages in.

TAGS: individuals | compliance | tax | business | Cayman Islands | transfer pricing | penalties | Regulations | Tax | BEPS

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