Good Things to Know About Incorporating a Business in the Cayman Islands

There is no income tax in the Cayman Islands, no company or corporation tax, and no capital gains, inheritance, or gift tax, making it extremely business-friendly.

The benefits of Cayman Islands corporate registry have attracted many thousands of international companies to the tiny Caribbean island territory. Its developed and stable economy, tax-neutral status, minimal government reporting requirements, proximity to the US mainland, and a legal system based on English Common Law have turned this former British colony into a financial powerhouse with the region’s highest per capita income.

The government’s tax incentives to foreign firms and individuals wanting business registrations in the Cayman Islands, or to invest assets through a Cayman offshore company, have encouraged the development of support services in trusts, insurance, banking, and accounting and fund management. Financial services and international banking are the most significant revenue earner for the government, easily outperforming tourism as the prime contributor to the local economy.

The Cayman Islands operate under an indirect taxation regime where stamp duty, duties on imported goods, taxes on tourist accommodation, licensing fees, and departure taxes replace traditional government revenue generation avenues. There is no income tax in the Cayman Islands, no company or corporation tax, and no capital gains, inheritance, or gift tax, making it extremely business-friendly. This approach’s popularity has resulted in the Cayman Islands now having more than 100,000 companies on its corporate registry, in a territory with fewer than 65,000 residents.

There are three common types of registered companies in the Cayman Islands: the Ordinary Resident Company, Ordinary Non-Resident Company, and the Exempted Company. While Ordinary Resident status allows a company to be formed to conduct local business in the Cayman Islands, a Non-Resident or Exempted company is restricted to international offshore business only.

An extra level of confidence in the local tax regime is offered by the Cayman Islands government in the form of a Tax Exemption Certificate, a 20-year written guarantee ensuring an Exempted Company will not be subject to taxes for 20 years from the formation.

Incorporating in the Cayman Islands is also extremely private. While international agreements and cooperation to eliminate money-laundering and tax evasion have consigned instruments like the anonymous numbered Swiss bank account to history, business dealings’ need for discretion and privacy remains. Even though the Cayman Islands Registrar of Companies requires the names of directors and officers to be submitted, the incorporation documents do not reveal it. It is not available to the public.

A Cayman Islands Exempted Company can be run from anywhere globally, with shareholder and director meetings held anywhere, at any convenient time, and even by telephone or online. The company must have at least one director, who can also be a sole shareholder. A shareholder can be an individual or a corporation and can be of any nationality.

Unlike many offshore jurisdictions, the Cayman Islands do not insist that offshore companies hire a local director or shareholder. Nor is there any obligation for authorized capital deposits, no shares transfer taxes (except in real estate transactions). There are no restrictions on mergers with other corporations — in the Cayman Islands or elsewhere.

When it comes to annual reporting, the regulations are equally simple: the only requirement is a declaration that confirms the company’s operations have been carried out mainly outside of the Cayman Islands. The government requires no financial statements or accounts.

The regulatory system in the Cayman Islands provides offshore investors with zero restrictions on trade across international borders while simultaneously offering the benefit of minimal exposure to taxes and reporting. An Exempted Company that is 100% foreign-owned and with no exposure to tax liabilities in the territory can be set up within a week under the Cayman Islands business registry system and with very little paperwork.

As with any investment proposition, you are getting independent advice from a reputable professional service — both in your country of residence and the Cayman Islands — before committing to any decision is essential. With diligent research and a clear understanding of tax obligations at home, there are many high-quality support services in the Cayman Islands that are available to assist in making a success of your offshore venture.