Cayman Islands Country-by-Country Reporting Guidance Released
Further to our previous updates, the Department for International Tax Cooperation, on 29 March 2018, released Guidance on the Country-by-Country Reporting ("CbCR") requirements of entities that are resident in the Cayman Islands.
The Guidance sets out the Notification and / or Reporting requirements of Constituent Entities 1 of an MNE Group. It also addresses a number of technical issues. Although we highlight certain matters, this update is not exhaustive and its purpose is primarily for prompting consideration as to the applicability of the CbCR rules to Cayman Islands entities and the steps that will need to be taken by Constituent Entities.
Every entity that is resident in the Cayman Islands must determine whether or not it is a Constituent Entity (i.e. whether its Group qualifies as an MNE Group) and if it is, must identify the Reporting Entity of its Group (which may be itself). The notification and first reporting deadlines for Constituent Entities with a Cayman Islands Reporting Entity are 15 May 2018 and 31 May 2018, respectively. The notification deadline for Constituent Entities whose Reporting Entity is not resident in the Cayman Islands is 30 September 2018.
Investment Funds are not exempt from CbCR requirements. Accordingly, for the purposes of determining whether or not a fund is in scope of the CbCR regime, the same principles apply to an investment fund as would apply to a multinational corporate structure. That is, there has to be a determination of whether, applying consolidated accounting rules, they belong to an MNE Group with consolidated annual revenue of US$850 million or more during the Group's 2016 fiscal year.
Deemed listing provisions will be relevant to an entity which would otherwise be the Ultimate Parent Entity of a group, but is not required to prepare consolidated financial statements in its jurisdiction of tax residence. In such cases, its Group includes all entities that would be included in the consolidated financial statements that it would be required to prepare if it were listed on a public securities exchange.
The Guidance specifies that references to 'public securities exchange' shall include the Cayman Islands Stock Exchange ("CSX"). We note that the listing rules of the CSX currently require any entity whose equity securities are traded on the CSX to prepare consolidated financial statements in accordance with International Accounting Standards, United States, United Kingdom or Canadian generally accepted accounting principles, or such other standards as may be acceptable to the CSX (together, the "Accounting Standards"). The Consolidation rules of the relevant Accounting Standards will therefore continue to apply.
CIMA Regulated Branches May Have Reporting and / or Notification Obligations
In our update of 21 December 2017, we included the definition of "resident in the Cayman Islands". The definition includes "being subject to financial supervision in the Cayman Islands". The Guidance notes that "being subject to financial supervision" includes supervision by the Cayman Islands Monetary Authority ("CIMA").
Accordingly, and for example, a Cayman Islands branch of an overseas bank that is the Ultimate Parent Entity of an MNE Group may be a Reporting Entity for the purposes of the Cayman Islands CbCR regime, even if it is making a CbC report in another jurisdiction. Alternatively, if they are not the Reporting Entity of an MNE Group the branch may still be a Constituent Entity with corresponding notification obligations.
Notification and Reporting Requirements
The Guidance sets out the necessary formalities and rules for notification and reporting and we do not repeat these in detail here. However, the Reporting Entity of an MNE Group with Constituent Entities resident in the Cayman Islands must appoint individuals who will be the Primary Contact and the Secondary Contact for those Constituent Entities.
Each of the Primary Contact and Secondary Contact must be the same individual for all Cayman Islands Constituent Entities in the MNE Group. However, they do not need to be resident or have an address in the Cayman Islands.
A notification must be made by the Primary Contact who will upload an Authorisation Letter and Constituent Entities File in accordance with the Tax Information Authority's template.
CbC reports must be in CbC XML Schema format and include prescribed information. Manual submissions will not be accepted.
The relevant notification templates and CbC XML schema guide are available on the TIA website. The CbCR portal is expected to open for notifications in early April and for reporting in mid-April.
For further information or advice on the CbCR Regulations please contact any of the persons listed above or your usual Maples and Calder or MaplesFS contact.
1 Please refer to our update of 21 December 2017 for a summary of key defined terms