COUNTRY

Cayman

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    CAYMAN ISLANDS TAX FILING

    The Cayman Islands is a popular offshore financial centre for businesses and individuals around the world. One of the key factors that make the Cayman Islands an attractive destination for international investment is the Cayman Islands tax regime, which includes zero corporate and income taxes. 

    In addition, no direct taxes are paid by Cayman Islands residents. Residents are not subject to income tax, property tax, capital gains tax, or withholding tax. 

    The Department for International Tax Cooperation is in charge of taxes and adheres to the Common Reporting Standard (CRS) for the automatic exchange of financial accounting data for tax purposes.

    WHO QUALIFIES AS A TAX RESIDENT IN THE CAYMAN ISLANDS?

    The length of the stay, the reason for the stay, and the person’s ties to the nation are all taken into consideration when determining tax residency in the Cayman Islands. 

    A person is deemed a resident for tax purposes in the Cayman Islands if they have been there for at least 183 days in a calendar year or if they have a permanent place of residence there and are present for at least 30 days during that year. 

    An individual will be required to pay taxes on their worldwide income, including money generated outside of the Cayman Islands, if they meet the requirements to be considered a tax resident in the Cayman Islands.

    TYPES OF TAXATION IN THE CAYMAN ISLANDS

    The Cayman Islands don’t use taxes to fund their infrastructure. Instead, its thriving tourist sector provides the majority of its income. 

    The government also raises money by asking anyone requesting residency to make large investments in the islands. The Cayman Islands have a foreign population of over 40%, therefore the territory’s government has profited significantly from the investments made by those looking to settle there.

    It’s crucial to keep in mind, though, that moving to the Cayman Islands to live abroad is rather expensive. The applicant will have to prove that they make at least $150,000 a year as part of the application procedure. Additionally, they must open and maintain a Cayman Islands bank account with a minimum balance of $500,000.

    They will need to make a sizeable investment in the Cayman Islands—usually  $1,000,000 or more. Depending on the island they want to live on, the exact amount will vary, and the investment requirements change every year.

    TAXATION IN THE CAYMAN ISLANDS

    • No Corporate Income Tax – Companies in the Cayman Islands don’t have to pay corporate income tax and are not subject to taxation on their profits. Because of this, businesses can retain more of their earnings.
    • No Capital Gains Tax – The absence of corporate income tax is one of the key factors influencing the decision of the companies to incorporate in the Cayman Islands. This allows businesses to keep the majority of their income, which they can either invest or distribute to shareholders.
    • No Withholding TaxThere is no withholding tax on dividends, interest, and royalties paid to non-residents. Companies can distribute profits to their shareholders or make interest payments on loans without any withholding tax obligations. 
    • No Sales Tax or Value Added Tax (VAT) – The Cayman Islands do not impose sales taxes or VAT, in contrast to many other countries. Because of this, businesses are not subject to additional taxes on the goods or services they sell locally. 

    REGISTRATION FEES, ANNUAL FEES, AND STAMP DUTIES IN CAYMAN ISLANDS

    Even if the Cayman Islands is tax-friendly, certain fees and stamp duties are applicable, such as registration fees for incorporating a company, annual fees for maintaining the company’s registration, and stamp duties on specific transactions and documents. 

    Stamp duty is levied on a variety of different transactions. For instance, one must pay stamp duty at a rate of 7.5% when they transfer real estate. 

    Depending on the type of transaction, there may be a difference in the amount of stamp duty one has to pay. For instance, the amount of stamp duty they pay when transferring shares in a real estate company could range from 1% to 1.5%.

    • Social contributions – In the Cayman Islands, employers or employees are not required to contribute to social security. Employers must offer their employees health insurance and invest in recognized pension schemes. Employees are required to pay into the pension insurance scheme a minimum of 5% of their salary. Both companies and employees contribute to the cost of health insurance.
    • International tax treaties – Cayman Islands has 19 TIEAs with other nations and a DTC with the UK. These agreements facilitate information sharing between parties and prevent double taxation on income.
    • Foreign exchange controls – The Cayman Islands have no limitations on currency exchange. This implies that there are no limitations on money transfers between individuals or businesses and the nation. The free flow of cash is encouraged by this strategy, which also makes international business transactions easier.
    • Tax and Property Ownership – For experienced real estate investors and first-time home buyers, there are no ongoing taxes or real estate fees. Government-guaranteed property rights are secured through a modern computerized and trustworthy land ownership system, and foreign ownership is not forbidden. The majority of the time, land can be owned forever without having to construct anything on it or pay yearly taxes. Together with an advanced banking business, there is a thriving rental market and a robust tourism economy. Owning property on the islands can result in year-round rental income because rental revenue is not subject to taxation.

    BENEFITS OF THE CAYMAN ISLANDS’ CORPORATE TAX SYSTEM

    PROS

    Reduced Tax Liabilities

    Reduced Tax Liabilities:

    Companies in Cayman Islands don’t have to pay corporate income tax, capital gains tax, or withholding tax on dividends or interest payments. They can reduce their tax liabilities and increase profits.

    No Double Taxation

    No Double Taxation:

    The Cayman Islands has double taxation treaties with various countries. This helps to prevent businesses from being taxed twice on the same income.

    Flexibility

    Flexibility:

    The Cayman Islands’ tax system is flexible and can accommodate a wide range of business structures and investment vehicles, including hedge funds, private equity funds, and special purpose vehicles. 

    Refer to Registering a company in the Cayman Islands guide, if you wish to know more about the process of incorporating here. Reach out to us at Relin Consultants for further assistance.

    FAQs

    What is the corporate tax rate in the Cayman Islands?

    There is no corporate income tax in the Cayman Islands.

    Why don't the Cayman Islands pay taxes?

    Cayman has few resources in the traditional sense because it is a small family of islands and generates little of its own food or manufactured goods. As a result, the government is able to generate substantial sums of money through import taxes rather than by levying income taxes directly on its citizens.

    What does the Cayman Islands' indirect tax look like?

    Real estate and other assets held in the Cayman Islands are also exempt from estate and inheritance taxes. However, indirect taxes are imposed on the majority of imported goods, often in the range of 22% to 25%, even though some goods are only subject to 5% taxes or are free altogether.

    What are the tax advantages of relocating to the Cayman Islands?

    You could expect a tax-friendly environment with no income tax, property tax, or capital gains tax if you choose to live abroad in the Cayman Islands. In the Cayman Islands, expats enjoy a high standard of living with excellent infrastructure, healthcare, and education.

    What is the Cayman Islands' main source of income?

    The three primary industries are real estate development and sales, tourism, and financial services. The Cayman Islands’ economy is said to be supported by two pillars: finance and tourism.

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