1. Connection Factors
1.1 To what extent is domicile or habitual residence relevant in determining liability to taxation in your jurisdiction?
There is currently no form of direct taxation in the Cayman Islands.
1.2 If domicile or habitual residence is relevant, how is it defined for taxation purposes?
This is not applicable (see question 1.1).
1.3 To what extent is residence relevant in determining liability to taxation in your jurisdiction?
There is currently no form of direct taxation in the Cayman Islands.
1.4 If residence is relevant, how is it defined for taxation purposes?
This is not applicable (see question 1.3).
1.5 To what extent is nationality relevant in determining liability to taxation in your jurisdiction?
There is currently no form of direct taxation in the Cayman Islands.
1.6 If nationality is relevant, how is it defined for taxation purposes?
This is not applicable (see question 1.5).
1.7 What other connecting factors (if any) are relevant in determining a person's liability to tax in your jurisdiction?
There is currently no form of direct taxation in the Cayman Islands.
1.8 Have the definitions or requirements in relation to any connecting factors been amended to take account of involuntary presence in (or absence from) your jurisdiction as a result of the coronavirus pandemic?
This is not applicable (see question 1.7).
2. General Taxation Regime
2.1 What gift, estate or wealth taxes apply that are relevant to persons becoming established in your jurisdiction?
There are currently no gift, estate or wealth taxes in the Cayman Islands.
2.2 How and to what extent are persons who become established in your jurisdiction liable to income and capital gains tax?
There are currently no income or capital gains taxes in the Cayman Islands.
2.3 What other direct taxes (if any) apply to persons who become established in your jurisdiction?
There is currently no form of direct taxation in the Cayman Islands.
2.4 What indirect taxes (sales taxes/VAT and customs & excise duties) apply to persons becoming established in your jurisdiction?
A person who is looking to immigrate to the Cayman Islands and import certain household/personal belongings may import such goods, within six months of becoming resident in the Islands, free of any duty or customs, provided that they owned the goods for at least 12 months prior to arrival. Goods imported outside of those parameters will be subject to customs duty – generally at rates ranging from 0–42%; however, the exact rate is dependent on the types of goods being imported.
2.5 Are there any anti-avoidance taxation provisions that apply to the offshore arrangements of persons who have become established in your jurisdiction?
No, there are not.
2.6 Is there any general anti-avoidance or anti-abuse rule to counteract tax advantages?
No, there is not.
2.7 Are there any arrangements in place in your jurisdiction for the disclosure of aggressive tax planning schemes?
No, there are not.
3. Pre-entry Tax Planning
3.1 In your jurisdiction, what pre-entry estate, gift and/or wealth tax planning can be undertaken?
There are currently no estate, gift or wealth taxes in the Cayman Islands.
3.2 In your jurisdiction, what pre-entry income and capital gains tax planning can be undertaken?
There are currently no income or capital gains taxes in the Cayman Islands.
3.3 In your jurisdiction, can pre-entry planning be undertaken for any other taxes?
There are currently no other relevant taxes in the Cayman Islands.
4. Taxation Issues on Inward Investment
4.1 What liabilities are there to tax on the acquisition, holding or disposal of, or receipt of income from investments made by a non-resident in your jurisdiction?
There is currently no form of direct taxation in the Cayman Islands.
4.2 What taxes are there on the importation of assets into your jurisdiction, including excise taxes?
See question 2.4. Newly acquired goods (i.e. those not owned for at least 12 months prior to arrival in the Cayman Islands), and older goods not imported within six months of arrival are subject to customs duty, with such rate depending on the type of asset.
4.3 Are there any particular tax issues in relation to the purchase of residential properties by non-residents?
At the time of purchase, a purchaser must pay stamp duty on the property. Unless one of the statutory exemptions apply, this would be at a rate of 7.5%.
5. Taxation of Corporate Vehicles
5.1 What is the test for a corporation to be taxable in your jurisdiction?
There is no test as there is currently no form of direct taxation referable to corporations in the Cayman Islands.
5.2 What are the main tax liabilities payable by a corporation which is subject to tax in your jurisdiction?
There is currently no form of direct taxation referable to corporations in the Cayman Islands.
5.3 How are branches of foreign corporations taxed in your jurisdiction?
There is currently no form of direct taxation referable to branches of foreign corporations in the Cayman Islands.
6. Tax Treaties
6.1 Has your jurisdiction entered into income tax and capital gains tax treaties and, if so, what is their impact?
No, it has not, as there are currently no income or capital gains taxes in the Cayman Islands.
6.2 Do the income tax and capital gains tax treaties generally follow the OECD or another model?
This is not applicable (see question 6.1).
6.3 Has your jurisdiction entered into estate and gift tax treaties and, if so, what is their impact?
No, it has not, as there are currently no estate or gift taxes in the Cayman Islands.
6.4 Do the estate or gift tax treaties generally follow the OECD or another model?
This is not applicable (see question 6.3).
7. Succession Planning
7.1 What are the relevant private international law (conflict of law) rules on succession and wills, including tests of essential validity and formal validity in your jurisdiction?
The rules in the Cayman Islands relating to wills and succession draw a distinction between movable and immovable property.
As regards movable property, Cayman Islands law looks to the lex domicilii (that is, the law of the deceased's domicile at the time of their death) in order to determine the succession to that property; consequently, the essential validity of a will disposing of movable property will be governed by the lex domicilii. On the other hand, the succession to immovable property (wherever situated), and the essential validity of a will disposing of the same, will be determined by the lex situs.
The formal validity of a will executed by a person who was domiciled in the Cayman Islands at the time of death, or of any will disposing of immovable property in the Cayman Islands, will be determined by Cayman Islands law. The requirements are contained in section 6 of the Wills Act (as revised). The will must be made in writing and signed by the testator at the foot with the intention of giving effect to the will. The testator must sign in the presence of two witnesses present at the same time, who then sign the will in the presence of the testator.
The formal validity of a will executed by a person who was domiciled outside of the Cayman Islands at the time of death is governed by The Formal Validity of Wills (Persons Dying Abroad) Act, 2018. The will is treated as properly executed if its execution conforms to any of the following: (a) Cayman Islands law; (b) the law of the territory where the will was executed; (c) the law of the territory where, at the time of execution of the will or at the testator's death, the testator was domiciled or had their habitual residence; or (d) the law of the state of which the testator was a national at the time of execution of the will or at the testator's death. The only exception to this is that the execution of a will disposing of immovable property in the Cayman Islands must conform to Cayman Islands law.
An individual's domicile is determined according to the same principles that apply under the law of England and Wales.
7.2 Are there particular rules that apply to real estate held in your jurisdiction or elsewhere?
Cayman Islands law applies the lex situs in order to determine the succession to real estate (wherever situated). A will disposing of real estate in the Cayman Islands must comply with the formal validity requirements under Cayman Islands law.
7.3 What rules exist in your jurisdiction which restrict testamentary freedom?
There are none. There is no forced heirship regime in the Cayman Islands and no legislation equivalent to the United Kingdom's Inheritance (Provision for Family and Dependents) Act 1975.
8. Trusts and Foundations
8.1 Are trusts recognised/permitted in your jurisdiction?
Trusts are recognised and permitted in the Cayman Islands. Cayman Islands trust law derives from the principles of English common law and equity supplemented and enhanced by domestic legislation. The principal trust law statutes are the Trusts Act (as revised) (which was originally based on the United Kingdom's Trustee Act 1925), the Banks and Trust Companies Act (as revised), the Fraudulent Dispositions Act (as revised) and the Perpetuities Act (as revised).
8.2 How are trusts/settlors/beneficiaries taxed in your jurisdiction?
There is currently no form of direct taxation referable to trusts (or settlors and beneficiaries) in the Cayman Islands. Most trust instruments attract stamp duty of CI$40.
8.3 How are trusts affected by succession and forced heirship rules in your jurisdiction?
Part VII of the Trusts Act (as revised) contains robust and comprehensive “firewall” provisions that protect Cayman Islands trusts (and dispositions of property to their trustees) against claims based on foreign law principles (including non-recognition of trusts, rights arising by reason of a personal relationship to the settlor or any beneficiary and forced heirship). These provisions also prevent foreign judgments based on such claims from being recognised or enforced in the Cayman Islands.
8.4 Are private foundations recognised/permitted in your jurisdiction?
The Foundation Companies Act, 2017 provides for the establishment of foundation companies, a flexible form of company designed to function in a similar way to a civil law (or common law) foundation. The foundation company has separate legal personality and limited liability, and is incorporated and registered with the Registrar of Companies in the same way as a traditional Cayman Islands exempted company. The constitutional documents comprise a memorandum and articles of association. Bylaws can also be used to govern the management of the foundation company, although they are not mandatory and do not form part of the constitution. A foundation company must have one or more members for the purposes of incorporation but, thereafter, may cease to have members provided that it has one or more supervisors.
Save to the extent otherwise specified in the Foundation Companies Act, 2017, Cayman's Companies Act (as revised) applies to a foundation company, as does the substantial body of jurisprudence on Cayman Islands companies.
8.5 How are foundations/founders/beneficiaries taxed in your jurisdiction?
There is currently no form of direct taxation referable to foundation companies (or founders and beneficiaries) in the Cayman Islands.
8.6 How are foundations affected by succession and forced heirship rules in your jurisdiction?
The “firewall” provisions in the Trusts Act (as revised) (see question 8.3) also apply to property contributed to foundations companies (and Cayman companies generally).
9. Matrimonial Issues
9.1 Are civil partnerships/same-sex marriages permitted/recognised in your jurisdiction?
Pursuant to the recently introduced Civil Partnership Act, 2020, civil partnerships are now permitted in the Cayman Islands; same-sex marriages on the other hand are not. However, there is currently a case under appeal in the Judicial Committee of the Privy Council regarding the same; there may therefore be developments in this area in the future.
9.2 What matrimonial property regimes are permitted/recognised in your jurisdiction?
There is currently no community of property regime in the Cayman Islands.
9.3 Are pre-/post-marital agreements/marriage contracts permitted/recognised in your jurisdiction?
There is currently no statutory regime in the Cayman Islands that regulates or recognises the use of pre-nuptial or post-nuptial agreements. The courts ultimately have the discretion to determine how property is to be distributed on a divorce (see question 9.4) and may give appropriate consideration to the terms of any agreement when exercising such discretion.
9.4 What are the main principles which will apply in your jurisdiction in relation to financial provision on divorce?
As mentioned above, the courts have the discretion to determine how property falls to be distributed on a divorce. In exercising their discretion, the courts will consider various factors including, but not limited to, the needs of any children of the marriage, the responsibilities and financial needs of any parties, the income of each party and any pre-nuptial or post-nuptial agreements agreed between the parties.
10. Immigration Issues
10.1 What restrictions or qualifications does your jurisdiction impose for entry into the country?
Visitors to the Cayman Islands may enter for up to six months at the discretion of the officer at the time of entry, provided that they have: a valid passport (more than six months until expiry date); a return ticket; and sufficient funds to support their stay. Visitors from certain countries require a visa.
Most professionals from overseas require a work permit in order to work in the Cayman Islands. Certain categories of worker are exempt, for example, government employees. In the majority of cases, there is a standard term limit of nine years after which no further work permits will be issued. After eight years, most permit holders are entitled to apply for permanent resident status.
A special category of work permit is available to employees in the Special Economic Zone, with lower costs and more relaxed conditions, with the aim of attracting technology and certain other types of business to the Islands.
10.2 Does your jurisdiction have any investor and/or other special categories for entry?
A Residency Certificate (Substantial Business Presence) is available to persons who invest in or who are employed in a senior management capacity within an approved category of business in the Cayman Islands. The business must have substantial presence in the Cayman Islands. Residency is granted for a period of 25 years, which will remain valid subject to paying an annual fee and retaining ownership/employment in the business.
Residence through Direct Investment is available to persons who invest not less than CI$1,000,000 in “employment generating business” in the Cayman Islands (being an existing or new venture in which, ordinarily, at least 30% of the total number of employees are Caymanian and in which the applicant exercises substantial management control). Residency is granted for a period of 25 years, which will remain valid subject to paying an annual fee and is extendable.
A Residency Certificate as a Person of Independent Means is available to persons over 18, in good health and with no serious criminal history. The applicant must have a continuous annual income in excess of CI$120,000 without the need to work in the Cayman Islands, and have invested at least CI$1,000,000 in the Islands (of which at least half must be in developed real estate in the Cayman Islands). The applicant must also maintain at least CI$400,000 in assets in a Cayman bank account at all times. The financial requirements are lower for those seeking residence in Cayman Brac or Little Cayman. Residency is granted for a period of 25 years, which is extendable and will remain valid subject to paying an annual fee.
A Certificate of Permanent Residency for Persons of Independent Means offers the right to reside indefinitely in the Cayman Islands. It is available to persons who invest a minimum of CI$2,000,000 in developed real estate in the Cayman Islands and who have financial resources sufficient to maintain themselves and their dependants. Naturalisation as a British Overseas Territories Citizen may be applied for after five years' residence.
10.3 What are the requirements in your jurisdiction in order to qualify for nationality?
The “right to be Caymanian” (Cayman nationality) may be granted, inter alia, to the following categories of persons:
- a child or grandchild of a Caymanian born in the Cayman Islands;
- a person who is married to a Caymanian; and
- a permanent resident who has been naturalised as a British Overseas Territories Citizen and who has been resident for 15 years or naturalised for five years (whichever happens earlier).
10.4 Are there any taxation implications in obtaining nationality in your jurisdiction?
There is currently no form of direct taxation in the Cayman Islands.
10.5 Are there any special tax/immigration/citizenship programmes designed to attract foreigners to become resident in your jurisdiction?
There is currently no form of direct taxation in the Cayman Islands. For other programmes, see question 10.2.
11. Reporting Requirements/Privacy
11.1 What automatic exchange of information agreements has your jurisdiction entered into with other countries?
In 2013, the Cayman Islands entered into an inter-governmental agreement with the United States in connection with the implementation of the US Foreign Account Tax Compliance Act (“FATCA”). The two governments have also signed a Tax Information Exchange Agreement, which outlines the legal channels through which tax information will automatically be exchanged. Additionally, in 2014, the Cayman Islands, along with 50 other jurisdictions, signed a Multilateral Competent Authority Agreement to demonstrate its commitment to implementing the Common Reporting Standard (“CRS”) issued by the Organisation for Economic Cooperation and Development. More than 100 countries have since agreed to implement the CRS, which imposes similar reporting and other obligations as the US IGA with respect to investors who are tax resident in other signatory jurisdictions. An entity with obligations is required to report to the Tax Information Authority (“TIA”) on an annual basis, with account information being disseminated by the TIA to tax authorities around the globe. The Cayman Islands government may also enter into additional agreements with other countries in the future, and additional countries may adopt CRS, which will further increase the reporting and/or withholding obligations of an entity with obligations.
11.2 What reporting requirements are imposed by domestic law in your jurisdiction in respect of structures outside your jurisdiction with which a person in your jurisdiction is involved?
Reporting requirements are imposed under the Tax Information Authority (International Tax Compliance) (United States of America) Regulations (as amended) and the Tax Information Authority (International Tax Compliance) (Common Reporting Standard) Regulations, for the exchange of tax information for FATCA and CRS purposes respectively, in relation to Cayman Islands “Reporting Financial Institutions” and any reportable account holders. In line with global standards, Cayman Islands entities conducting “relevant financial business” are required under the Anti-Money Laundering Regulations (as amended) to conduct due diligence on their customers and beneficial owners, regardless of jurisdiction for internal compliance purposes; however, this is not reported. Also in line with global standards, there are ad hoc local reporting requirements for financial crime prevention and under applicable financial sanctions requirements.
11.3 Are there any public registers of owners/beneficial owners/trustees/board members of, or of other persons with significant control or influence over companies, foundations or trusts established or resident in your jurisdiction?
There are currently no such public registers; however, there are beneficial ownership registers with entities obligated under legislative provisions to provide information, but such information is currently available to certain governmental and law enforcement authorities only. The Cayman Islands government has announced that it intends to introduce public registers of beneficial ownership for companies on a timeline that mirrors their introduction, as an international standard. It is expected this will occur before 2023.
Originally Published by ICLG in January 2022
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
