The Cayman Islands are a British overseas territory and considered a tax haven, in fact the islands are exempt from taxes, it is said to have been granted since the time of King George III of the United Kingdom (late eighteenth century). The Mutual Funds Law of 2003 builds a deregulated market for mutual funds in the archipelago. The tax exemption from taxes is valid only if the income is not returned to one’s country of residence, in which case it would be taxed according to the laws in force.
The archipelago, located in the Caribbean Sea south of Cuba, has its own government and its own single-chamber parliament. The local executive is chaired by a Governor, who is appointed by the Queen and acts as her representative. The Cayman Islands are an overseas territory of the United Kingdom, which is attributed a special autonomy in various sectors, including taxation.
Main sectors of industry
The national economy is characterized by the strong development of the financial sector. The Caymans are home to numerous corporations, banks, investment funds, captive insurance companies and trusts. The tax system is based on consumption taxes. The incomes of natural and legal persons are not subject to any type of taxation. Likewise, there are no capital gains or wealth taxes (not even in the form of inheritance and gift tax). From 1 January 2016, the resident multinationals must prepare the CbCR – Country-by-Country Report, introduced following the adhesion to the BEPS – Base Erosion and Profit Shifting Actions proposed by the OECD with the aim of promoting transparency among the authorities tax laws of the various countries between which specific mutual cooperation agreements are in force. In particular, the report in question must contain information about financial details, tax data relating to the allocation of taxes and income, as well as other certain economic indicators.
Taxation for businesses
The Caymans do not have an income tax system. Consequently, no tax is levied on the income of companies and other resident entities or on the income produced by local branches or branches of foreign companies.
Companies operating in the Cayman Islands are considered “ordinarily resident” if they carry out their business mainly in the archipelago, and non-residents if they carry out their business mainly outside the archipelago. This distinction, however, has no relevance for tax purposes.
Companies that obtain the status of “exempted” companies cannot carry out commercial activities in the Caymans except for those strictly functional to the conduct of an activity outside the island. The exempted companies can obtain a certificate that guarantees exemption from any tax that may be introduced in the Caymans in the next 20 years. This concession can be extended for a further 10 years. In addition, companies having the legal form LLP – Limited Liability Partnership are entitled to receive the qualification of exempted companies with a certificate that guarantees exemption from any tax for 50 years, instead of 20.
The value added tax
The Cayman Islands do not have a value added tax comparable to the European VAT.
The other taxes
The majority of the Cayman Islands’ revenue comes from corporate registration taxes, trade license fees, stamp duties, and customs duties.
Duties apply to goods imported into the Cayman Islands, with varying rates based on the type of good. The government can exempt assets intended for the construction of public buildings or tourist facilities, and imported assets for carrying out works that it believes will provide long-term benefits for the local population.
Investing in the Cayman Islands
Premier Offshore defines the Cayman Islands as “one of the most transparent and professional tax neutral jurisdictions”. Over time, the Cayman Islands have developed a strong reputation for enabling investors to maximize the international tax advantages available to them from their home country. While they have many investment options, they specialize in investing for sophisticated investors and large corporations. As a result, the benefits go both ways: International financial services account for 55% of the Cayman Islands economy and 36% of their employment.
Since 2000, the Cayman Islands have been on the “white list” of the Organization for Economic Co-operation and Development (OECD). This OECD list recognizes countries for their acceptance of internationally recognized tax standards in their laws. The Cayman Islands are also listed as following the Foreign Account Tax Compliance Act (FATCA), a US law that came into effect in 2010 and requires offshore banks to report US accounts with over $ 50,000 USD (US dollars) in business. Being part of these two lists also makes it easier for you to comply with the financial laws of your home country.
One of the main reasons investors choose to set up offshore accounts in these tropical islands is because of the Cayman Islands Banking Secret. The Cayman Islands take the privacy of their customers very seriously.
RJ Mintz’s legal department explains that banking secrecy laws in the Caymans are among the strictest in the world. There are various penalties for any unauthorized disclosure. The laws surrounding trust formation are highly developed and provide a great level of flexibility, protection and privacy. Companies can be formed with a minimum amount of documents and shares through such companies can be held anonymously to bearer or nominees.
Personal and savings accounts are obviously available in the Cayman Islands, but they’re not the only way to get a return on your assets. Although Cayman Islands bank interest rates may vary by bank, one way to get the best rates is with a fixed deposit or fixed term deposit. Investopedia defines this as a deposit held with a fixed term financial institution.