The Cayman Islands government supplied a progress report on improvements in its tax information exchange regime at the third meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes, held in Bermuda from 31 May to 1 June.
The report is a response to the 2010 phase 1 peer review report on the Cayman Islands, which aimed to assess the existing legal framework and regulatory regime for the exchange of tax information and noted several shortcomings, in particular with regard to the retention of accounting records and documents by companies, partnerships and trusts.
Premier McKeeva Bush highlighted the legislative amendments to the Cayman Islands companies, partnership and trusts laws, which now require the retention of relevant accounting records and underlying documentation for a minimum period of five years and impose enhanced sanctions for non-compliance in line with the international standards.
In light of the changes, the government requested a supplementary report to take note of the changes and upgrade the original determination with regard to the retention of accounting records. In addition the government continues to review the remaining recommendations of the peer review report.
‘Committed to doing our part’
“My government is committed to doing our part in advancing the international standards of the Global Forum – evidenced by our participation over the past 11 years,” Mr. Bush said. “Furthermore, the Cayman Islands will be hosting the next Global Forum Peer Review Group Meeting in July, and are pleased to welcome over 40 jurisdictions to our shores.”
The Cayman Islands also initial
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ed another tax information exchange agreement at the Global Forum. The agreement with China will come in addition to nearly two dozen TIEAs the Cayman Islands has already concluded.
“The Cayman Islands currently has 23 TIEAs in place with relevant partners – the most recent with the Republic of South Africa having been signed in early May – and we will continue to enhance our tax transparency regime through increased cooperation efforts such as this one,” said Samuel Bulgin, attorney general and member of the Cayman Islands International Tax Cooperation Team.
The Global Forum meeting was attended by over 220 delegates from 85 member jurisdictions and 11 international organisations and saw the publication of a number of new peer review reports on notable countries, including the US.
US peer review
The US peer review report found a sophisticated regulatory regime in the United States and noted the large number of information requests processed by the US each year. The power of the IRS to obtain information for tax purposes is wide-ranging and supported by US courts for the purpose of responding to a request for information und an information exchange mechanism, the review said.
The report, however, also pointed to shortcomings with respect to the availability of ownership and identity information in the case of limited liability companies that only have one owner. Where an LLC has no US owner, is not engaged in a US trade or business, has no employees or activities in the US, has no US income and is not otherwise subject to any form of US tax, information on the owner cannot be obtained according to US federal tax laws. While information may be available through state law this is not universally guaranteed.
Changes that were introduced in federal law will not necessarily ensure the availability of ownership information for these types of LLCs, which are also not required to maintain adequate accounting records, the report said.
Although the review acknowledges that the number of cases is small in relation to the entire US tax information exchange programme, it recommends that the US ensure that information concerning the owners of all LLCs is available and that accounting records are available.
Other criticism referred to delays in the provision of information at the competent authority, which the review says should speed up its internal processes.
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