Competent Authority Agreement on CbC Reports between Guernsey and the Cayman Islands

Summary

This document is a bilateral Competent Authority Agreement (CAA) between the Cayman Islands and Guernsey, signed in Paris in March 2018, that operationalises the automatic exchange of Country-by-Country (CbC) Reports between the two jurisdictions' tax authorities. It is made under the existing Guernsey-Cayman Islands Arrangement for the Automatic Exchange of Information Relating to Tax Matters (2011, as amended 2015) and sets out how the DITC (as the Cayman Islands Competent Authority) and its Guernsey counterpart will share CbC Reports filed by Reporting Entities of Multinational Enterprise (MNE) Groups that are tax resident in one jurisdiction but have Constituent Entities or permanent establishments in the other.

The agreement itself does not directly regulate private entities; rather it binds the two Competent Authorities to specific obligations covering exchange mechanics between them. It confirms that CbC Reports filed by Reporting Entities under domestic law (in the Cayman Islands, under the CbCR Regulations) will be automatically exchanged with Guernsey where a Constituent Entity of the relevant MNE Group is tax resident or has a taxable presence there.

• Exchange mechanics: How CbC Reports will be transmitted between the two Competent Authorities.
• Timing: Timelines governing when exchanges must take place.
• Data format: Requirements for the format in which CbC data is exchanged.
• Confidentiality safeguards: Protections to safeguard the confidentiality of exchanged data.
• Permissible use restrictions: Limits on how the exchanged CbC data may be used, including restrictions on using CbC data as the sole basis for transfer pricing adjustments.
• Compliance and enforcement collaboration: Cooperation between the two Competent Authorities on compliance and enforcement matters.

For compliance officers of MNE Groups with a Cayman Islands Reporting Entity, the practical implication is confirmation that their CbC Report data will flow to Guernsey's tax authority under the agreed timelines and safeguards. The agreement enters into effect upon notification by the Cayman Islands Competent Authority that the necessary domestic legislation is in place, and either party may suspend or terminate the arrangement under specified conditions.

Key obligations

• The Cayman Islands Competent Authority will annually and automatically exchange CbC Reports received from Cayman Islands-resident Reporting Entities with Guernsey's Competent Authority where a Constituent Entity of the MNE Group is tax resident or has a permanent establishment in Guernsey.
• The first CbC Report exchange (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 fiscal year.
• CbC Reports for subsequent fiscal years must be exchanged as soon as possible and no later than 15 months after the last day of the relevant fiscal year.
• Exchanges must use a common XML schema and agreed electronic transmission/encryption methods.
• Information exchanged must be kept confidential and used only for assessing high-level transfer pricing/BEPS risk and economic/statistical analysis, not as the sole basis for transfer pricing adjustments.
• If Guernsey identifies errors or non-compliance by a Cayman Islands Reporting Entity, the Cayman Islands Competent Authority must take all appropriate measures under domestic law to address it.
• Each Competent Authority must notify the other of non-compliance with confidentiality/data safeguard provisions, including remedial actions taken.
• Either Competent Authority may temporarily suspend information exchange upon written notice of significant non-compliance by the other, after consultation.
• Either Competent Authority may terminate the Agreement by written notice, effective the first day of the month following 12 months after the notice.

Applies to

Reporting Entities of Multinational Enterprise (MNE) Groups, Constituent Entities of MNE Groups, Competent Authority of the Cayman Islands (DITC), Competent Authority of Guernsey

Deadlines

• no later than 18 months after the last day of the fiscal year: Deadline for first exchange of CbC Reports with respect to fiscal years of MNE Groups commencing on or after 1 January 2016.
• no later than 15 months after the last day of the fiscal year: Deadline for exchange of CbC Reports for subsequent fiscal years.
• first day of the month following expiration of 12 months after notice of termination: Effective date of termination of the Agreement if either Competent Authority gives written notice of termination.
• date of notification by the Cayman Islands Competent Authority that necessary CbC filing legislation is in place: Date the Agreement comes into effect.