Cayman Islands BEPS Action 13 Reporting Requirements
Updated Filing Requirements
The Cayman Islands is a member of the Organisation for Economic Co-operation and Development’s (“OECD’s”) Inclusive Framework on Base Erosion and Profit Shifting (“BEPS”). The Department for International Tax Cooperation (“DITC”), the Cayman Islands tax authority, published the Country-by-Country Reporting (“CbCR”) regulations on December 15, 2017. On March 29, 2018, the DITC issued an industry advisory with further details and guidance on the requirements.
In the industry advisory, the DITC confirmed that CbCR reporting requirements apply to captive multinational enterprise groups (“MNEs”) with combined consolidated group revenue of US$850 million (or more) during the previous fiscal year. The DITC defines a relevant group as “a collection of enterprises related through ownership or control, such that it is either required to prepare consolidated financial statements for financial reporting purposes under applicable accounting principles or would be so required if the equity interests in any of the enterprises were traded on a public securities exchange.”
In determining whether the total consolidated group revenue meets the US$850 million threshold, all of the revenue recorded in the consolidated financial statements (or near equivalent in local currency as of January 2015) should be considered. Extraordinary income and gains from investment activities may be excluded if allowed by the ultimate parent’s jurisdiction reporting requirements.
An entity considered resident of the Cayman Islands that is a constituent entity (“CE”) of an MNE must meet the CbCR reporting requirements. A CE that is not the reporting entity of an MNE does not need to file a CbCR, but it must notify the DITC that it is a member of a MNE and identify the tax residence of the MNE’s reporting requirement.
A reporting entity of a MNE group with constituent entities must appoint individuals who will be the primary and secondary contacts for those constituent entities. To complete the notification process, the primary contact must provide the name of the MNE group, its website, and the identification of the ultimate parent entity. The DITC will review this information and provide the primary contact with login credentials to file the secondary portion of the notification. The secondary notification will be filled as a CSV template. CbCR notification is required, even if a MNE has similar requirements in another jurisdiction.
The notification deadline is May 15, 2018, if the reporting entity is a resident of the Cayman Islands and the MNE’s fiscal year began on or after January 1, 2016. If the reporting entity is not a resident of the Cayman Islands, the notification deadline is September 30, 2018.
Any entity subject to reporting requirements must file a Country-by-Country (“CbC”) Report with the tax authority. A reporting entity must also comply with its reporting obligation under the CbCR regulations, even if it has a similar CbC reporting obligation in another jurisdiction or another constituent entity made a CbC Report in another jurisdiction.
CbC Reports should be filed in accordance with the OECD final guidelines. The DITC recognizes that the OECD does not address issues pertaining to every type of entity or industry. Entities should adopt a reasonable, practical, and consistent approach in completing the CbC Report when specific guidance is not given. The first fiscal year for CbC reporting purposes is that which began during 2016. In general, entities must file within 12 months of the end of the relevant fiscal year. However, the DITC regulations provide a grace period, not included in the OECD Guidelines, for entities filing in the first year. Reporting entities with fiscal years that began anywhere from January 1, 2016, to June 1, 2016 had until May 31, 2017, to complete the filing requirements.
The DITC has specific guidance and instructions regarding the XML Schema and procedures to access the online portal to file the guidance. Once submitted, a CbC Report may be modified only by direct email request from the primary contact.
Master and Local Files
The Cayman Islands does not require any reporting entity to submit a master or local file as part of the reporting process. The tax authority has the power to do all things necessary or convenient in order to fulfill international commitments. In certain circumstances, the tax authority may require entities to provide information that would otherwise be contained in the master or local file.