Competent Authority Agreement on CbC Reports between Isle of Man and the Cayman Islands

Summary

This document is a bilateral Competent Authority Agreement (CAA) between the tax authorities of the Isle of Man and the Cayman Islands, implementing automatic exchange of Country-by-Country (CbC) Reports under the existing Tax Information Exchange Agreement (TIEA) between the two jurisdictions. It sets out the mechanics by which the Cayman Islands Tax Information Authority will annually send CbC Reports filed by Cayman-resident Reporting Entities of Multinational Enterprise (MNE) Groups to the Isle of Man's Assessor of Income Tax, where the MNE Group has constituent entities or a taxable permanent establishment in the Isle of Man. The exchange is non-reciprocal (Cayman to Isle of Man only).

The agreement does not itself create the domestic obligation for MNE Groups to file CbC Reports -- that arises under Cayman's own CbC reporting legislation and the OECD BEPS Action 13 framework. Rather, it governs the timing, format, confidentiality, permissible use, and error/non-compliance handling for the government-to-government exchange of already-filed reports.

• Consultation: Rules for consultation between the two competent authorities.
• Suspension: Provision for suspension of the arrangement in the event of significant non-compliance.
• Amendment: Rules governing amendment of the arrangement.
• Termination: Rules governing termination of the arrangement between the two competent authorities.

For compliance officers of MNE Groups with Cayman Islands reporting entities and Isle of Man operations, the practical significance is that CbC Report data filed with the Cayman DITC will be shared with Isle of Man tax authorities on the schedule and confidentiality terms described. That data will only be used for high-level transfer pricing/BEPS risk assessment and statistical purposes, not as a standalone basis for transfer pricing adjustments.

Key obligations

• The Cayman Islands Competent Authority will annually and automatically exchange CbC Reports received from Cayman Islands-resident Reporting Entities with the Isle of Man Competent Authority, where a constituent entity of the MNE Group is tax resident or has a taxable permanent establishment in the Isle of Man.
• The first CbC Report exchange (for fiscal years of MNE Groups 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 the Competent Authorities must work toward agreed electronic transmission and encryption methods.
• Each Competent Authority must notify the other of errors, incorrect/incomplete reporting, or non-compliance by a Reporting Entity, and the receiving authority must take all appropriate measures under its domestic law to address such errors or non-compliance.
• Information exchanged must be kept confidential and used only for assessing high-level transfer pricing and BEPS-related risks or for economic/statistical analysis, not as a substitute for a full transfer pricing analysis or as sole basis for a transfer pricing adjustment.
• A Competent Authority may temporarily suspend exchange, after prior consultation, upon determining significant non-compliance by the other party; suspension continues until the non-compliance is resolved.
• A Competent Authority may terminate the Agreement by written notice, with termination taking effect on the first day of the month following expiration of 12 months after the notice; previously exchanged information remains confidential under the TIEA even after termination.
• Amendments to the Agreement require written consensus and take effect on the first day of the month following one month after the last signature, unless otherwise agreed.

Applies to

Multinational Enterprise (MNE) Groups, Reporting Entities, Constituent Entities

Deadlines

• 18 months after the last day of the fiscal year of the MNE Group: Deadline for the Cayman Islands to first exchange a CbC Report with the Isle of Man, 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 exchange of CbC Reports for fiscal years subsequent to the first reporting year.
• 12 months after the date of a notice of termination: Termination of the Agreement becomes effective on the first day of the month following expiration of this 12-month period.
• one month after the date of the last signature of a written amendment: An agreed amendment to the Agreement takes effect on the first day of the month following expiration of this period, unless otherwise agreed.