2024 11 29 – GUIDE ON CORPORATE INCOME TAXES – CAYMAN ISLANDS

Our Perspective:

This guide provides an overview of private wealth management in the Cayman Islands, including tax implications, trusts, foundations, estate planning, and related legislative considerations.

Taxation Overview

  1. Income and Capital Gains Tax: The Cayman Islands imposes no income or capital gains taxes.
  2. Wealth Tax: There is no wealth tax in the jurisdiction.
  3. Withholding Tax: The Cayman Islands does not levy withholding taxes.
  4. Double Taxation: The absence of income or capital gains taxes eliminates the potential for double taxation.
  5. Estate and Gift Taxes: No taxes are applied to inheritance or gifts, although stamp duty may apply to property transfers.

Real Property and Digital Assets

  • Property Tax: There are no property taxes; however, a 7.5% stamp duty applies to property transactions (with exemptions for first-time Caymanian buyers).
  • Digital Assets: No specific tax regulations exist for digital assets.

Import Duties

Most goods imported into the Cayman Islands are subject to import duties, typically at 22%, with variations depending on the item.

Succession and Estate Planning

  1. Freedom of Testamentary Disposition: Individuals have complete freedom over their estates, with no forced heirship rules.
  2. Matrimonial Property: Property ownership determines succession, with jointly held property passing to the survivor.
  3. Wills: A valid will must be in writing, signed, and witnessed. Dying intestate leads to fixed inheritance rules under the Succession Act.
  4. Administration: Executors or administrators manage estates, collecting assets, paying debts, and distributing the remainder.

Trusts and Foundations

  1. Trust Structures: Commonly used structures include discretionary and STAR trusts, allowing flexibility in managing assets for beneficiaries or purposes.
  2. Foundation Companies: These hybrid entities blend the features of companies and foundations, providing additional flexibility.
  3. Tax Treatment: Trusts and foundations are exempt from taxes, except for nominal stamp duty on certain documents.

Asset Protection and Philanthropy

  1. Asset Protection: Properly established trusts can shield assets from creditors, provided they comply with the Fraudulent Dispositions Act.
  2. Charitable Structures: Individuals often establish charitable trusts or foundation companies to support philanthropic goals.

Information Sharing

The Cayman Islands complies with international standards, including the OECD’s Common Reporting Standard (CRS) and FATCA, ensuring transparency and exchange of financial information.

Legislative Updates

  • Recent updates to the Beneficial Ownership Transparency Bill may affect trust and company structures.
  • Anticipated adoption of the OECD’s Mandatory Disclosure Rules (MDRs) could introduce new reporting obligations.

This article is intended to offer a general overview of the topic. For advice tailored to your specific situation, it is recommended that you seek professional guidance.