Updates on Automatic Exchange of Information (AEOI) Cayman Islands - - PowerPoint PPT Presentation
Updates on Automatic Exchange of Information (AEOI) Cayman Islands Compliance Association (CICA) Peter Stafford Head, AEOI (Acting), Department for International Tax Cooperation Wednesday, 21 March, 2018 | Grand Cayman Disclaimer: This
Updates on Automatic Exchange of Information (AEOI) Cayman Islands Compliance Association (CICA)
Peter Stafford Head, AEOI (Acting), Department for International Tax Cooperation Wednesday, 21 March, 2018 | Grand Cayman Disclaimer:
This presentation is intended to give a general overview of the topics addressed and cannot be relied upon for any legal purposes
1. Country-by-Country Reporting (CbCR) 2. Common Reporting Standard (CRS) 3. CRS Mandatory Disclosure Rules (MDR)
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– Refers to tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations – BEPS distortions: MNE affiliates in low tax countries report almost twice the profit rate (relative to assets) of their global group
including Cayman, are collaborating to implement the BEPS measures
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– Transfer pricing refers to prices charged between related parties (e.g. a parent company and its controlled foreign corporation) in an intercompany transaction
consolidated financial statements
with different CIT rates can affect the MNE Group’s profits – CbCR is designed to enhance transparency for tax administrations by providing them with adequate information to assess high-level transfer pricing and other BEPS-related risks
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– “Group”
either – required to prepare Consolidated Financial Statements for financial reporting purposes under applicable accounting principles or – would be so required if equity interests in any of the enterprises were traded on a public securities exchange
– “Excluded MNE Group”
– “MNE Group”
i.e. largest 10-15% of all Groups which own 85-90% of all assets
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– Any entity that is part of an MNE Group – CbCR Regulations only apply to Constituent Entities that are “resident in the Islands”
DITC expects a few thousand in Cayman, i.e. only a very small percentage of all Cayman companies, partnerships and trusts
– Two types
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– Required for every Constituent Entity resident in the Islands – Reporting Entity
– templates: Authorisation Letter; CSV formatted CE File
– Deadline for notification:
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– Every Reporting Entity resident in the Islands must electronically file a CbC Report – Reporting deadline this year is 31 May 2018 – TIA must transmit CbC Messages by 30 June 2018 to other jurisdictions participating in CbCR
– XML schema prescribed by the OECD
Guide for Tax Administrations
Constituent Entity (wherever resident): – Residence – Revenues from related parties and from unrelated parties; profits; taxes paid and accrued; employees; non-cash assets
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– comply with obligations under CRS Regulations
– Cayman:
(revised 5 January 2018)
– OECD:
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31 December 2015 Pre-existing Accounts in scope for due diligence procedures 1 January 2016
New Accounts requiring self-certification by the customer 31 December 2016 Complete review of Pre-existing High-Value Individual Accounts End of first CRS reporting period 30 June 2017 (30 April in future) Cayman Financial Institutions complete initial registration on AEOI Portal (available from 17 May 2017) 13 September 2017 (31 May in future) Cayman Reporting Financial Institutions and Trustee Documented Trusts complete initial reporting on AEOI Portal 30 September 2017 TIA completes first transmission of CRS reports to OECD Common Transmission System (CTS) for onward transmission to relevant Reportable Jurisdictions; recipient Competent Authorities’ inquiries to TIA will follow 31 December 2017 Complete review of Pre-existing lower value Individual Accounts Complete review of Pre-Existing Entity Accounts
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5 January 2018 CRS lists of Participating & Reportable Jurisdictions updated 15 March 2018 CRS Guidance Notes v3.0 replaces v2.0 15 March 2018 AEOI Portal User Guide v4.0 replaces v3.2.1 15 March 2018 AEOI Portal reopens with new CRS and FATCA features 30 April 2018 CRS / FATCA – deadline for CFIs to notify (register) 31 May 2018 CRS / FATCA – deadline for CFIs to submit Returns 30 September 2018 CRS / FATCA deadlines for transmission to CTS / IDES 31 December 2018 CRS due diligence remediation of Controlling Persons 2018 CRS Regulations 2018 Revision expected 2020 Global Forum AEOI Peer Reviews of CRS Implementation
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Appendix 2 to the CRS Guidance Notes v3.0 (Extraordinary Gazette 2-2018)
Andorra France Nauru Anguilla Germany Netherlands Antigua and Barbuda Ghana New Zealand Argentina Gibraltar Niue Aruba Greece Norway Australia Greenland Pakistan Austria Grenada Panama Azerbaijan Guernsey Poland Bahamas, The Hong Kong (China) Portugal Bahrain Hungary Qatar Barbados Iceland Romania Belgium India Russian Federation Belize Indonesia Saint Kitts and Nevis Bermuda Ireland Saint Lucia Brazil Isle of Man Saint Vincent and the Grenadines British Virgin Islands Israel Samoa Brunei Darussalam Italy San Marino Bulgaria Japan Saudi Arabia Canada Jersey Seychelles Cayman Islands Korea Singapore Chile Kuwait Sint Maarten China Latvia Slovak Republic Colombia Lebanon Slovenia Cook Islands Liechtenstein South Africa Costa Rica Lithuania Spain Croatia Luxembourg Sweden Curaçao Macau (China) Switzerland Cyprus Malaysia Trinidad and Tobago Czech Republic Malta Turkey Denmark Marshall Islands Turks and Caicos Islands Dominica Mauritius United Arab Emirates Estonia Mexico United Kingdom Faroe Islands Monaco Uruguay Finland Montserrat Vanuatu
Now 102 Participating Jurisdictions with more to follow in 2019 and 2020
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Appendix 3 to the CRS Guidance Notes v3.0 (Extraordinary Gazette 2-2018)
In 2017 there were 45 Reportable Jurisdictions
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Appendix 3 to the CRS Guidance Notes v3.0 (Extraordinary Gazette 2-2018)
In 2018 there 45 more Reportable Jurisdictions added; the total is now 90
(Industry Advisory lists the key changes) – Entity Self-Certification – new form for corrected definition of Controlling Persons of Account Holder that is a legal person classified as a Passive NFE under CRS (page 17) – Lists of Participating Jurisdictions and Reportable Jurisdictions – FI in liquidation must arrange for service provider to perform
completion after dissolution (e.g. maintain books and records post dissolution) – FI migrating from the Cayman Islands to another Participating Jurisdiction – Indirect distribution by trust
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(Industry Advisory lists the key changes) – Principal Point of Contact (PPoC) change request – new process – Authorizing Person (AP):
– FI deactivation - new process (previously referred to as FI termination) – A CFI will be permitted 90 days from the date the TIA sends an email notification to the CFI’s PPoC that it must correct any error(s) in its CRS return – New validation rule for FATCA Returns for Preexisting Individual Account Holder where the CFI has the date of birth but has been unable to obtain the US TIN
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notifications for 2016 CRS / FATCA Returns (there are not many instances)
TINs in respect of certain historical FATCA Returns – The AEOI Portal has improved validations which prevent reoccurrence
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1. Overview: – Criminal fines / administrative penalties of CI$50,000 (generally CI$20,000 for individuals) 2. Source: – Tax Information Authority (International Tax Compliance) (Common Reporting Standard) (Amendment) Regulations, 2016 – Summarized by CRS Guidance Notes v2.0, Section VII (includes “liability grid”)
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Regs.
etc.) may have imputed liability (i.e. CFI to individual)
(i.e. from representative to CFI)
causing breach of confidentiality, unauthorized tampering with information or hindering the TIA
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1. CFIs are correctly classified, and that all those with reporting obligations are reporting to the TIA via the AEOI Portal 2. CFIs’ due diligence processes correctly identify all Reportable Persons 3. CFIs are correctly reporting the data on Reportable Persons to the TIA via the AEOI Portal
– Review data on the AEOI Portal:
– Comparison of data on the AEOI Portal to external sources – Requests for additional supporting information from CFIs where indicated – Reviews of due diligence procedures and documentation and other evidence held by CFIs as appropriate
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implemented to include: – requirements for CFIs to submit additional information annually via the AEOI Portal on due diligence and internal controls for CRS compliance – appropriate audit / inspection mechanisms
– Over 90% are Investment Entities; over 90% reporting – Cayman Investment Entities outsource their AML, accounting and CRS compliance functions to service providers worldwide
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The CRS Regulations deem to be invalid any arrangements designed to avoid CRS obligations
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– CRS Mandatory Disclosure Rules on Avoidance Arrangements and Opaque Offshore Structures (CRS AA OS) – MDR is designed to provide tax administrations with information on CRS AA OS, including the users and those involved with their supply
inform future tax policy design
and use of CRS AA OS.
– EU Commission recently proposed a Council Directive to adopt MDR- type rules by amending the EU Directive on administrative cooperation in the field of taxation (DAC 6):
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– designed to, marketed as or has the effect of, circumventing CRS or exploiting absence of CRS
– An Offshore Structure is a Passive Offshore Vehicle (POV) that is held through an Opaque Ownership Structure (OS)
economic activity supported by staff, equipment assets and premises
allowing a natural person to be a Beneficial Owner of a POV while
appearance that such person is not a Beneficial Owner.
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– responsible for the design or marketing of CRS AA OS
– provide assistance or advice with respect to the design, marketing, implementation or organisation of that CRS AA OS (“Relevant Services”)
– Intermediaries – Taxpayers (end users)
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