1.1 Tax Regimes
The Cayman Islands
The Cayman Islands comprise 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-west 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.
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; the Lands and Survey Department may carry out a property assessment 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 Act (2021 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. The undertaking provides 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
Common Reporting Standard
The Cayman Islands is an "early adopter" of the Common Reporting Standard (CRS). 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.
EU DAC 6
The Cayman Islands does not have DAC 6.
Tax Information Exchange
At the time of writing, the Cayman Islands has signed 36 bilateral tax information exchange agreements, and an intergovernmental agreement with both the USA and the UK. It has entered into bilateral tax treaties with 27 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 Act (2021 Revision).
On 1 July 2017, the Cayman Islands' beneficial ownership register (BOR) regime came into effect, which requires certain Cayman Islands companies to maintain a BOR. The BOR records details of the individuals who ultimately own or control 25% or more 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) Act 2018 now in its 2021 Revision (the "ITC Act") came into force, with accompanying regulations. "Relevant entities" undertaking "relevant activities" (as defined in the ITC Act) must provide an annual report of their activities to the TIA and satisfy the "economic substance test" set out in Section 4 of the ITC Act.
2.1 Cultural Considerations in Succession Planning
There are no notable cultural factors playing a part in succession planning in the Cayman Islands. Cayman Islands' succession law is based upon the principle of testamentary freedom, meaning that a testator or testatrix can leave their 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 Act (2020 Revision), the Succession Act (2021 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.
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. Succession law is based upon the principle of testamentary freedom.
When a person dies without a will, the intestacy rules provide that the surviving spouse will share the estate with the surviving children of the deceased. Closer relatives, starting with the parents of the deceased, will benefit in order of priority if no spouse or child survives the deceased.
2.4 Marital Property
Divorce in the Cayman Islands
A couple can divorce in the Cayman Islands if they have been "domiciled" there for at least a year on the date that one of them petitions for divorce. Domicile in this context means that one or other of the parties can demonstrate an intention to reside in the Cayman Islands permanently. Alternatively, a wife can petition for divorce if she has been "ordinarily resident" in the Cayman Islands for at least two years prior to filing the petition, regardless of where the other spouse lives.
Divorce in the Cayman Islands is based on the Matrimonial Causes Act (2005 Revision) (MCL), the Maintenance Act (1996 Revision) and supplemental Matrimonial Causes Rules, currently in their 2021 Revision. Parties in Cayman Islands divorce proceedings are still required to provide fault-based grounds for divorce; for example, adultery, desertion and unreasonable behaviour.
Division of Assets on Divorce
There is no community property regime in force and the court has broad discretion under Sections 19 and 21 of the MCL to decide the division of assets on divorce, taking into account a number of factors set out in local statute and derived from the common law.
In Billes v Anco  (2) CILR 74 (subsequently confirmed by the Court of Appeal in McTaggart v McTaggart  (2) CILR 366) it was established that the court will approach the division of assets on divorce in accordance with the "modern view". That is, there should be no discrimination based upon the nature of the roles undertaken by the parties to the marriage. The court should "aim for equality", derogating from that principle only in "exceptional circumstances".
Family law reform has been under discussion for some time, but the proposals have yet to become statute.
While there is no specific legislation in relation to pre or postnuptial agreements, the court is likely to afford them a similar status as the English Supreme Court in Radmacher v Granatino  UKSC 42. Again in Billes v Anco, the Judge found that the court should give weight to what was in that case an unsigned copy of what he referred to as a "marriage contract" or prenuptial agreement, in the division of assets upon divorce. The court thus retains discretion to disregard pre or postnuptial agreements or to lend them less weight, if they are found to be unfair to the children of the marriage or if there was some injustice in the way that the agreement was reached between the parties.
2.5 Transfer of Property
As there are no income, capital gains, corporate, wealth, withholding, estate or inheritance taxes levied in the Cayman Islands, a transfer of property on death or during one's lifetime has no effect on the cost basis of the property being transferred.
2.6 Transfer of Assets: Vehicle and Planning Mechanisms
As there are no income, capital gains, corporate, wealth, withholding, estate or inheritance taxes levied in the Cayman Islands, the mitigation of local taxes on the transfer of assets to younger generations is not a primary driver in succession planning.
2.7 Transfer of Assets: Digital Assets
There is no statutory regime in the Cayman Islands that applies specifically to the treatment of digital assets for the purposes of succession. If Cayman Islands law governs succession to the digital assets, then they will be treated in the same way as any other asset transferred pursuant to a will or the intestacy rules.
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Previously published in Chambers and Partners - September 2021
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.