On 29 October 2014, 51 jurisdictions signed the Organisation for Economic Co-operation and Development (OECD) Multilateral Competent Authority Agreement (MCAA) for the implementation of automatic exchange of tax information. The Appleby jurisdictions which signed the MCAA are Bermuda, British Virgin Islands, Cayman Islands, Guernsey, Isle of Man, Jersey, and Mauritius (Appleby jurisdictions). All Appleby jurisdictions are expected to start exchanging information under the MCAA by 2018. The form is almost identical to the form of intergovernmental agreements that are currently in place between the United Kingdom and the Governments of Bermuda, British Virgin Islands, Cayman Islands, Guernsey, Isle of Man and Jersey.
The MCAA implements the OECD’s Standard for Automatic Exchange of Financial Information. It is based on Article 6 of the OECD’s Multilateral Convention on Mutual Administrative Assistance in Tax Matters (Multilateral Convention) which states that two or more parties can mutually agree to exchange information automatically. Even though the MCAA is signed on a multilateral basis, the actual exchange of information will occur in a bilateral manner. The MCAA requires the Competent Authorities of participating jurisdictions to collect and automatically exchange tax information prescribed by the OECD’s Common Reporting Standard (CRS).
The CRS requires jurisdictions to obtain information from their financial institutions (FIs) and automatically exchange that information with other jurisdictions on an annual basis. It sets out the financial account information to be exchanged, the FIs required to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by FIs. Specifically, the CRS states that the FIs covered by the CRS include custodial institutions, depository institutions, investment entities and specified insurance companies, unless they present a low risk of being used for evading tax and are excluded from reporting. The financial information to be reported with respect to reportable accounts includes interest, dividends, account balance, income from certain insurance products, sales proceeds from financial assets and other income generated with respect to assets held in the account or payments made with respect to the account. Reportable accounts include accounts held by individuals and entities (which includes trusts and foundations), and the standard includes a requirement to look through passive entities to report on the relevant controlling persons.
The governments of the Appleby jurisdictions have already enacted legislation to implement the agreements in place with the United States and, where relevant, the United Kingdom and will need to enact legislation or regulations to implement the MCAA and the CRS in their jurisdictions.
FIs must examine their current procedures for reviews of pre-existing accounts and on-boarding new clients which should currently deal with reporting on US or UK persons so that they encompass all relevant jurisdictions by 1 January 2016 and must meet the deadline for the first reporting of information about non-resident account holders in 2017.