The Cayman Islands and 50 jurisdictions signed the Organisation for Economic Co-operation and Development’s (“OECD”) Multilateral Competent Authority Agreement (“MCAA”) on October 29, 2014 in Berlin. The MCAA implements the automatic exchange of tax information based on the OCED’s Multilateral Convention on Mutual Administrative Assistance in Tax Matters. The MCAA will require Competent Tax Authorities (“Authority” or “Authorities”) in these jurisdictions to automatically exchange relevant tax information based on the OECD’s Common Reporting Standards.
Here are some takeaways from the MCAA:
- The MCAA in tone has similarities to GATCA, a term to describe a global version of FATCA that would enable countries’ governments to charge tax evaders in up to 65 countries. While GATCA is not an actual policy in place, governments are increasingly making bilateral agreements to prevent tax evasion like the MCAA;
- Private funds based in the Cayman Islands will now have significantly more international tax reporting and compliance obligations. In addition to the MCAA, Cayman Island organization have additional reporting obligations based on US FATCA and the new UK FATCA The Cayman Islands has already implemented several of the laws and regulations to enable the automatic exchange with other authorities. See our discussion of UK FATCA here;
- The MCAA will be activated in each jurisdiction once the OECD can confirm that there is proper legislation in place to enforce the rules based on the OECD’s Common Reporting Standards. This rule is particularly important when considering privacy issues that may arise with frequent and large information swaps between Authorities;
- An Authority needs to provide a timeline of dates regarding enforcement for previous accounts and new accounts to the OECD for approval to implement automatic tax exchanges; and
- An Authority needs to provide the OECD a list of the other Authorities with which it would like to have an automatic tax exchange agreement. The MCAA does not guarantee exchanges with all of the signees.
The MCAA is a reminder to closely follow the ever changing landscape of international compliance rules and regulations, particularly in the area of tax. Firms operating in one or more of the jurisdictions listed should frequent the relevant websites for news regarding the possible regulation changes. Awareness of changing international regulation is especially true for private funds operating in Crown Dependencies and Overseas Territories, such as the Cayman Islands and the British Virgin Islands, in light of UK FATCA. Authorities look forward to the opportunity to catch tax evaders and violations can be very embarrassing and costly.