Bilateral Competent Authority Agreement on CbCR between Cayman Islands and the UK

Summary

This document is the bilateral Competent Authority Agreement (CAA) between the tax authorities of the United Kingdom (HMRC) and the Cayman Islands (the Tax Information Authority, acting through DITC) setting out the mechanics for automatically exchanging Country-by-Country (CbC) Reports filed by Multinational Enterprise (MNE) Groups. It operates under Paragraph 13 of the 2010 UK-Cayman Islands Double Taxation Arrangement and mirrors the OECD's standard CbCR exchange framework (BEPS Action 13).

The agreement itself does not directly regulate private businesses; rather it obliges each Competent Authority to exchange, on an automatic annual basis, the CbC Reports it receives from Reporting Entities resident in its own jurisdiction, where Constituent Entities of the relevant MNE Group are tax resident or have a taxable presence in the other jurisdiction.

• Timing: Sets timing rules for exchange of CbC Reports.
• Transmission: Establishes technical and electronic transmission standards.
• Confidentiality: Imposes confidentiality and permitted-use restrictions on the exchanged data.
• Notification: Provides a mutual notification process for suspected filing errors or non-compliance by Reporting Entities.
• Consultation and termination: Sets out consultation, suspension and termination procedures between the two Competent Authorities.

For Cayman Islands entities, the practical effect is that any MNE Group with a Reporting Entity resident in the Cayman Islands (or with Constituent Entities in both jurisdictions) will have its CbC Report data automatically shared with HMRC once filed domestically, and vice versa for UK Reporting Entities with Cayman-resident constituents. The underlying obligation to actually prepare and file a CbC Report arises from each jurisdiction's own domestic CbCR legislation, not from this agreement, which instead governs the exchange between authorities.

The agreement was signed 4 December 2017 and takes effect once both authorities notify each other that their domestic CbCR filing legislation is in place.

Key obligations

• Each Competent Authority will annually and automatically exchange CbC Reports received from Reporting Entities resident in its jurisdiction with the other Competent Authority where relevant Constituent Entities are located there.
• CbC Reports must be exchanged specifying the currency of amounts contained in the report.
• The first exchange of CbC Reports (for fiscal years commencing on or after 1 January 2016) must occur as soon as possible and no later than 18 months after the last day of the relevant MNE Group fiscal year; subsequent exchanges must occur no later than 15 months after the last day of the relevant fiscal year.
• Competent Authorities must exchange CbC Reports using a common XML schema and agree on electronic transmission/encryption methods.
• A Competent Authority must notify the other if it believes a Reporting Entity resident in the other's jurisdiction has made a reporting error or is non-compliant with its CbC filing obligation; the notified authority must take appropriate domestic measures to address this.
• Exchanged CbC Report information must be kept confidential and used only for permitted purposes (assessing transfer pricing/BEPS risk and economic/statistical analysis), not as sole basis for transfer pricing adjustments.
• Each Competent Authority must notify the other immediately of any non-compliance with confidentiality/use restrictions, including remedial actions taken.
• A Competent Authority may temporarily suspend information exchange, after consultation, upon determining significant non-compliance by the other party, with suspension lasting until the non-compliance is remedied.
• Either Competent Authority may terminate the Agreement by written notice, effective the first day of the month following 12 months after the notice; previously exchanged information remains confidential thereafter.

Applies to

Multinational Enterprise (MNE) Groups, Reporting Entities (Constituent Entities that file the CbC Report), Competent Authorities (HMRC and the Cayman Islands Tax Information Authority/DITC)

Deadlines

• 18 months after the last day of the fiscal year of the MNE Group: Deadline for exchanging the first CbC Report, applicable to fiscal years of MNE Groups commencing on or after 1 January 2016.
• 15 months after the last day of the fiscal year of the MNE Group: Deadline for exchanging CbC Reports for fiscal years subsequent to the first reporting year.
• 1 January 2016: Fiscal years commencing on or after this date are the first ones subject to CbC Report exchange under this Agreement.
• 12 months after notice of termination: Termination of the Agreement becomes effective on the first day of the month following expiration of this 12-month period after written notice of termination.