The Cayman Islands, a British overseas territory located in the western Caribbean Sea, has long been an attractive financial services center for investors and corporations. In addition to its bustling tourism industry, the islands offer a wide range of professional services such as banking, company formation, insurance, funds, vessel and aircraft registry, and its own stock exchange.
Advantages of Doing Business in the Cayman Islands
A Business-Friendly Environment
The Cayman Islands is recognized as one of the world’s leading providers of institutionally focused and specialized financial services. It is also a favored destination for the structure and domicile of offshore investments. Today more than 11,000 funds, of which 70% retain U.S. managers, are registered at the Cayman Islands Monetary Authority. The Cayman Islands has a stable government and a common law legal system is based on English law.
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Given this environment, Grand Cayman, the focal point for doing business in the islands, offers a broad array of professional director services that help overseas investors and investment managers ensure compliance with local laws and regulations.
Tax Neutrality
Doing business in the Cayman Islands brings significant tax benefits. Domestic or foreign companies do not pay corporation, capital gains, payroll, property or withholding taxes for doing business here.
Note: U.S. and U.K. citizens are still required to file income taxes in their country of residence.
Flexibility
A key benefit of registering a business in the Cayman Islands is that companies can use those corporate structures when conducting international investments or financial transactions. With a holding company in the Cayman Islands, businesses can maximize tax efficiencies, create IPOs, and merge with other companies in the Cayman Islands or with authorized foreign entities, and more. Cayman corporate structures are therefore a favored choice for wealth management and effective tax structuring.
Ease of Entity Registration
Registering a company in the Cayman Islands can happen in a short amount of time, typically three-to-five business days, although express same-day service is available. Fees are also relatively low and no minimum capital requirements are stipulated.
Fees, however, do rise as the amount of share capital increases.
To register a company, one company shareholder and director are required to complete the formation documents (they can also be the same person, a corporate body, or 100% foreign-owned). Once registered, Cayman companies truly become “offshore” and have the flexibility to operate from anywhere in the world. No annual general meetings (AGMs) are required, further easing the administration of doing business as an Exempt Company in the Cayman Islands.
Risks and Considerations
Increased Regulatory Scrutiny
Offshore investing has increasingly attracted the attention of the U.S. government as it seeks to limit lost tax revenue. In response, new laws designed to restrict tax loopholes have been enacted. The U.S. Foreign Account Tax Compliance Act (FACTA), for example, requires that resident and non-resident U.S. citizens report any foreign account holdings.
The Cayman Islands government has responded by implementing Anti-Money Laundering and Know Your Client (AML and KYC) policies for registered funds and plans further measures to ensure compliance with international standards.
Economic Substance Reporting
Following the lead of the European Union (EU), the Cayman Islands government now requires registered companies to comply with minimum economic substance requirements in order to benefit from the country’s low tax/no tax jurisdiction.
Economic substance means that any entity conducting business activities in Cayman, who is not a tax resident in another jurisdiction, must undertake substantial business activity related to its core operations in the Cayman Islands.
To comply with this requirement, such entities must file an Economic Substance notification via the Cayman General Registry system.
Data Protection
New data privacy laws came into effect on the Cayman Islands in September 2019. Modeled on the EU’s General Data Protection Regulation (GDPR) and other international privacy laws, the Cayman Islands Data Protection Law (DPL) regulates the processing of any personal data in the islands. This has important implications for funds, investors, and fund administrators of Cayman Island registered entities who collect or process personal data through those entities.
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Frequently Asked Questions for Doing Business in the Cayman Islands
Why should I consider doing business in the Cayman Islands?
Despite increased scrutiny from tax authorities and regulators, the Cayman Islands remains the premier domicile for investment funds, corporate structuring, trusts, professional fiduciary services, and banking.
How easy is it to conduct transactions or register a company in the Cayman Islands?
While there are many benefits of doing business in the Cayman Islands, it’s advisable not to go it alone. Different sovereignties have their own laws, banking regimes, accounting procedures, and more – all of which can bring unexpected challenges.
What are the entity types available in the Cayman Islands and how can I select the right one?
The main entities in the Cayman Islands are Exempt Company, Limited Liability Company (LLC), and Exempt Limited Partnership. When setting up a new entity, it is beneficial to understand requirements and to get the right advice about what entity type to set up.
What is the local tax rate?
Tax rates in the Cayman Islands are 0% across the board for all entity types. Learn more in our country guide.
How long does incorporation take?
Incorporating a business in the Cayman Islands typically takes between three-to-five business days for Exempt Companies and LLCs, and up to seven days for Exempt Limited Partnerships. There is also an option for expedited same-day service at an additional cost.