| Cayman Islands Income Tax There is no income tax, corporate tax, sales tax, capital gains tax, wealth tax, inheritance tax, property tax, gift tax or any other kind of direct taxation in Cayman Islands. This is one of the most significant reasons that Cayman Islands has attracted the registration of many offshore businesses (about 50,000) from all over the world.
Individuals are not liable to income and other types of direct taxes in the Cayman Islands. The only taxes that are due to be paid are import duties at varying rates depending on a transaction, and stamp duties, the rate of which may raise up to 9% on real estate transfers and 1.5% on mortgages which exceed a certain value.
Cayman Islands government receives the majority of its income from indirect taxation. There is no income tax or capital gains tax or corporation tax in Cayman Islands imposed on Cayman individuals and Cayman Islands companies. An import duty of 5% to 20% is levied against goods imported into the islands. Some items are tax exempt like baby formula, books and cameras. Tax on automobiles depends on the class and make of the model. Tax can reach up to 40% for expensive car models. Financial institutions that operate in the islands are charged a flat licensing fee by the government. A 10% government tax is placed on all tourist accommodations in addition to the small fee each tourist pays upon getting on the Caymans. The Cayman Islands government charges licensing fees to financial institutions that operate in the islands as well as work permit fees for expatriate employees ranging from around US$ 500 for a clerk to around US$ 20,000 for a CEO.
There is a departure tax of KYD 10.00 or US$ 12.50, and every traveler departing from the Cayman Islands which are over the age of 12 must pay it. There is a one-time stamp duty assessed on real estate purchases, and it ranges between 7.5% - 9%. If you buy a furnished house, the value of those furnishings is deducted before the stamp duty is calculated.
Cayman Islands Corporate TaxThere are no direct taxes applicable to companies of the Cayman Islands. Rates of import duties and stamp duties in the Cayman Islands vary depending on each particular transaction. However, a 10% government tax is applied on tourist accommodations, as well as each tourist must pay a small fee upon arrival.
Companies incorporated in the Cayman Islands are governed by the Companies Law and its amendments. This also regulates foreign corporations with a place of business in the islands.
An ordinary resident company is used for doing business locally and to own local land, ships or aeroplanes registered locally. Ordinary nonresident or exempt companies are used for conducting offshore or international business. The main differences between these two types of company are that an exempt company is allowed to issue bearer shares, use foreign terms in its name, and has fewer filing formalities.
Foreign companies may register a place of business in the Cayman Islands and conduct offshore business. In the case of Banks, a foreign Bank may set up a branch operation by this method. All banks registered in the Cayman Islands must have a physical presence there.
Tax guarantee against the future taxation of exempted companies, exempted limited partnerships and exempted trusts are available. The Governor in council gives an undertaking that no future law imposing any tax on profits, capital assets, gain, or appreciation will apply to the entity or its operations for a period of 20 to 30 years for an exempted company, and up to 50 years for exempted partnerships and trusts.
Cayman Islands TaxesCayman Islands levies no taxes on income. Cayman Islands government makes its revenue through indirect taxes. The main indirect taxes the Cayman Islands government derives income are:
- stamp duties,
- customs duties, and
- business licenses and fees.
Cayman Islands Stamp Duties
The Stamp Duty Law in the Caymans provides for the payment of tax on various documents including:
- Conveyance or Transfer of Immovable property: 5% of value transferred
- Real estate in specified blocks in West Bay and George Town: 7.5% to 9% of value sold
- Mortgage of Property 1% to 1.5% of sum secured
- Bills of Exchange - Cheques: KYD 0.10 each
- Bills of Exchange - Other: KYD 0.25 per KYD 100 (maximum KYD 250)
- Lease of Land - Term over 30 years: 5% of value of property
- Lease of Land -Premium and term is less than 30 years: 5% of average annual rent
- Tax on rent:
. Term is less than 30 years but does not exceed 5 years: 5% of average annual rent
. Term is less than 30 years exceeds 5 but not 10 years: 10% of average annual rent
. Term is less than 30 years exceeds 10 years: 20% of annual average rent
Cayman Islands Customs Duties
Cayman Islands customs duties on imported goods average 20%. Certain items duty free. Customs duty exempt items include agricultural machinery and supplies, certain basic foodstuffs and luxury items such as perfumes, cameras, fine china and crystal.
Cayman Islands Business Licenses and Fees
In Cayman Islands, an annual fee is levied on all companies based on its share capital. In addition, licensed financial services companies pay annual license fees, dependent on the type of business.
Class A Bank US$ 500,000
Class B Bank (unrestricted) US$ 70,000
Class B Bank (restricted) US$ 45,000
Class A Insurers License US$ 40,000
Unrestricted Class B Insurers License US$ 9,000
Restricted Class B Insurers License US$ 9,000
Mutual Fund License Fee US$ 3,000
All local businesses in Cayman Islands require a license and an annual payment is made dependent on the type and size of the business. These fees would not normally affect offshore companies and businesses.
Cayman Islands - Types of CompaniesOrdinary Resident Company
This type of company is appropriate for conducting a local business in Cayman Islands. Bearer shares are not allowed. The register of members must be held in the registered office, which is open to a public inspection. An AGM must be held. The name of the company ends with Ltd or Limited.
Ordinary Nonresident Company
Similar rules as those applied to resident companies govern ordinary non-resident companies, with the exception that such a company's business must be conducted outside the Cayman Islands. Together with an exempt company, these types of companies are usually chosen for offshore business purposes. A certificate of a non-residence status is issued by the financial authority and information on such a company's shareholders must be provided. Financial accounts must be kept, but they need not be audited. Ordinary nonresident companies can be converted to exempt companies.
Exempt Company
An exempt company's name does not end with Ltd or Limited words, as do ordinary nonresident companies' names. Other differences from that type of company include the following: an exempt company may issue bearer shares, it need not hold shareholders' meeting in the Cayman Islands, a list of shareholders need not be kept and submitted to the authorities on the annual basis, a certificate of Tax Exemption may be obtained. This type of company is often chosen for the purposes of collective investments.
Limited Duration Exempt Company
This type of company is different from an exempt company in the Cayman Islands by the following traits: a limited duration of a company up to 30 years must be stated in the Memorandum of Association, there should always be at least two members, company's management may be conducted by shareholders directly or a board of directors may be appointed for these purposes. The name of the company must include LDC, which means Limited Duration Company.
Foreign Company
Companies which are incorporated outside the Cayman Islands, but which wish to establish their presence within the jurisdiction, may register there as foreign companies. A company's representative, a Cayman resident, must be appointed to act on behalf of the company. In addition, a copy of the company incorporation documents must be submitted in the English language, as well as the names and addresses of its directors. A company may re-domicile from or to the Cayman Islands following precisely described procedures.
Limited Partnership
At least one general partner and a minimum of one limited partner form a limited partnership. A general partner is fully liable for a partnership's obligations, while the responsibility of a limited partner is limited to the contribution made. In order to register a limited partnership in Cayman Islands, information on all the partners must be filed with the Registrar of Limited Partnerships.
Exempted Limited Partnership
A partnership may obtain an exempt status if it does not conduct business with public in the Cayman Islands. Tax Exemption certificated is issued for a period up to 50 years. Information on names of partners and their contributions to the partnership need not be submitted with the Registrar.
Cayman Islands Trust
Trust legislation of the Cayman Islands is based on English trust law. Only a company that has obtained a trust license must offer trust services on the Cayman Islands. Cayman Islands Trusts need not be registered. However, those trusts which want to obtain an exempt status must be registered with the Registrar of Trusts.
Tax Treaties of Cayman IslandsThe Cayman Islands does not have a tax treaty with any country. Income received in the Cayman Islands from abroad may be subject to taxation in the country of origin.
In recent years the Cayman Islands has entered into various international anti-narcotics trafficking and anti money laundering agreements.
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