UK: Private Wealth 2019: Cayman Islands

1. Tax

1.1 tax regimes

The Cayman Islands is made up of three islands: Grand Cayman, Cayman Brac and Little Cayman. They are located in the Western Caribbean Sea, approximately 500 miles south of Miami, Florida. The capital city, George Town, is located on the south western shore of Grand Cayman.

The Cayman Islands is a British Overseas Territory, run as a parliamentary democracy with judicial, executive and legislative branches. The Cayman Islands has its own constitution and bill of rights. The local parliament, called the Legislative Assembly, has 19 elected members, from which a Premier, Deputy Premier and Speaker are appointed.M

A Governor, appointed by the Government of the United Kingdom, presides over meetings of the cabinet and has special responsibility for defence, external affairs, internal security, the police and the civil service. The Deputy Governor, who, along with the Attorney General, is a non-voting ex officio member of the Legislative Assembly, is appointed by the Governor, pursuant to advice from the Crown. The Governor also appoints members of the judiciary.

The Cayman Islands has a sophisticated judicial system presided over by a Chief Justice, and has a number of full and part-time judges and justices of the peace, some of whom serve as lay magistrates. There are three courts: the Summary Court, the Grand Court and the Court of Appeal. The Grand Court, which has a dedicated Financial Services Division, has jurisdiction over all civil claims in the Cayman Islands. From there, appeals lie to the Court of Appeal, which sits in the Cayman Islands three times a year. Final rights of appeal, in certain circumstances, lie to the Judicial Committee of the Privy Council in London.

There are no income, capital gains, corporate, wealth, withholding, estate or inheritance taxes levied in the Cayman Islands. Import duties are payable on most items brought into the country. Stamp duty is payable on the purchase of land in the Cayman Islands and levied on certain documents executed within, brought into or produced before the court in the Cayman Islands. Stamp duty on deeds and documents ranges from KYD40 to KYD100.

The stamp duty calculated on the purchase of property is currently 7.5% of the purchase price or the market value of the property, whichever is higher, and a property assessment may be carried out by the Lands and Survey Department to establish which is the greater. There are time limits for the payment of stamp duty on property purchases, with fines and penalties for late payment. Stamp duty exemptions are available, which currently do not apply to overseas first-time buyers.

1.2 Stability of the estate and transfer tax Laws

There are no income, capital gains, corporate, wealth, withholding, estate or inheritance taxes levied in the Cayman Islands, and the jurisdiction is widely recognised as offering a stable economic and political system. Accordingly, a fear of future tax uncertainty in the Cayman Islands rarely plays into tax and estate planning. A trustee of a trust that satisfies the conditions set out in sections 73 to 86 of the Trusts Law (2018 Revision) can apply for such trust to be registered as an exempted trust with the Registrar of Trusts. The register is not open to public inspection. On payment of a fee, the Financial Secretary may provide an undertaking to the trustee of an exempted trust that no law imposing any income, capital gains or estate tax that comes into effect over a period not less than 50 years from the date of creation of the exempted trust will apply to any property in or income arising in such exempted trust.

1.3 transparency and Increased Global reporting

The Cayman Islands is an 'early adopter' of the Common Reporting Standard (CRS) and, as such, CRS regulations were issued in October 2015 and again in December 2016 to effect the implementation of the OECD Standard for Automatic Exchange of Financial Account Information.

At the time of writing, the Cayman Islands has signed 36 bilateral tax information exchange agreements, and an Inter-governmental Agreement with both the USA and the UK. It has entered into bilateral tax treaties with 28 European Union Member States, under which it reports savings income pursuant to the European Union Savings Directive.

The Cayman Islands established a dedicated Tax Information Authority (TIA) in 2005 to assist in the discharge of the country's tax information exchange obligations. The TIA is the sole dedicated channel in the Cayman Islands for international co-operation on matters involving the provision of tax-related information. The TIA is a function of the Department for International Tax Co-operation and has statutory responsibility under the Tax Information Authority Law (2017 Revision).

On 1 July 2017, the Cayman Islands' beneficial ownership register (BOR) regime came into effect. This regime requires certain Cayman Islands companies, including limited liability companies, to maintain a beneficial ownership register that records details of the individuals who ultimately own or control more than 25% of the equity interests or voting rights in that company, or have rights to appoint or remove a majority of the company directors or LLC managers, together with details of certain intermediate holding companies. Companies that are within the scope of the legislation must maintain their BOR at their Cayman Islands registered office with a licensed corporate services provider.

On 1 January 2019, the International Tax Co-operation (Economic Substance) Law 2018 (ITC Law) came into force, with accompanying regulations. 'Relevant entities' undertaking 'relevant activities' (as defined in the ITC Law) must provide an annual report of their activities to the TIA and satisfy the 'economic substance test' set out at s4 of the ITC Law. Guidance notes were published in April to provide further practical guidance on the application of the ITC Law.

2. Succession

2.1 Cultural Considerations in Succession Planning

There are no notable cultural factors that play a part in succession planning in the Cayman Islands. The Cayman Islands' succession law is based upon the principle of testamentary freedom, meaning that a testator or testatrix can leave his or her estate in their will to anyone that he or she wishes, if they have the necessary capacity to do so.

The relevant statutes in connection with succession matters are the Wills Law (2004 Revision), the Succession Law (2006 Revision) and the Probate and Administration Rules (2008 Revision). Broadly, these laws set out the practice and procedure for obtaining grants of probate, letters of administration and the resealing of foreign grants, as well as the rules relating to the disposition of an intestate's estate. If a deceased dies leaving a will, the executors will apply for a grant of probate, which will authorise them to access the estate of the deceased and distribute it in accordance with the terms of the will. If a deceased dies without a will, various relatives in order of priority are entitled to take out the grant of letters of administration. Other grants of representation are available to deal with less common situations – for example, ad colligenda bona grants – if there is an urgent need for a grant to be issued or to preserve assets in the estate until such time as the person entitled to take out the grant is able to do so.

2.2 International Planning

As families and businesses have become increasingly global, the focus on international planning has benefited the Cayman Islands as a centre of excellence in financial services. The jurisdiction offers a diverse range of succession planning vehicles and highly experienced service providers who are accustomed to working closely with a family's advisers in their home jurisdiction(s) to tailor a structure to suit the family's requirements.

2.3 Forced Heirship Laws

There are no 'forced heirship' laws in the Cayman Islands, where succession law is based upon the principle of testamentary freedom.

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