Since 2003, Healy Consultants Group assists multi-national Clients’ with Caymans Islands business set up including i) company registration and ii) regulatory license approvals and iii) multi-currency corporate bank account opening and iv) legal and accounting and tax considerations.

Cayman Islands business setup summary

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• Benefits and problems

  Benefits of doing business in Cayman Islands

  1. All Cayman Islands entities are exempt of all local taxes including i) no corporation tax and no personal income tax and ii) no withholding tax and no capital gains tax and iii) no VAT and no inheritance nor estate taxes and iv) no shares transfer taxes and v) no wealth taxes and vi) no export taxes.
  2. With over 13,000 regulated open-ended funds and 16,000 regulated closed-ended funds, the Cayman Islands is popular with fund managers because:
     • There are minimum annual statutory reporting obligations and light regulatory license requirements; and
     • It is fast to set up an offshore investment fund; and
     • The annual corporate general meetings can be held anywhere in the world; and
     • The legal system based on English Common Law; and
     • The island enjoys a quality financial infrastructure, including world-renowned banks, trust companies, law firms, accountancy firms, company management firms, and IT service providers; and
     • Today more than 11,000 funds are registered with the Cayman Islands Monetary Authority, of which 70% retain U.S. managers,
     • The Cayman Islands is the largest offshore hedge fund domicile in the world, approximately 80% of those funds are either SEC registered, or operate in a master/feeder structure with an SEC registered fund; and
     • The Cayman Islands is one of the 5 largest financial centers in the world by deposits and the world’s largest financial center for investment funds, with the presence of the global largest financial institutions.
  3. There is a special relationship between the USA and the Caymans Islands. Some USA Clients’ are attracted to the Caymans Islands because:
     • The jurisdiction provides for a pass-through LLC, similar to the USA LLC. Thus, eliminating USA corporation tax; and
     • Through annual FATCA reporting, there is openness and transparency between the Caymans Islands and the USA; and
     • Caymans Islands Trusts and Foundations help with USA inheritance and estate planning; and
     • English is the official language in the Cayman Islands; and
     • The Cayman Islands corporate law is similar to that of Delaware; and
     • The US Government’s largest holding of foreign securities are issued by the Cayman Islands.
  4. There are no exchange control restrictions or regulations in the Cayman Islands. Funds can be freely transferred in and out of the Islands in unlimited amounts. The Cayman Islands dollar is tied to the US dollar and the latter is freely accepted and used within the local economy. The majority of business conducted in the Caymans Islands is done in US$.
  5. A simple Caymans Islands exempt company is attractive to multi-national Clients because:
     • Within a week, the company can be formed with minimum Government paperwork; and
     • With no minimum paid-up share capital requirements and only one shareholder and director of any nationality is required; and
     • The company name does not need to include the words “Limited” or “LTD”; and
     • Cayman does not impose “thin capitalisation” rules or impose any general maintenance of capital requirements.
     • Provided a company maintains cash-flow and balance sheet solvency, there are no limitations relating to its ability to distribute assets to its shareholders by way of dividend. There is no statutory restriction on the provision of financial assistance in respect of the acquisition of a Cayman company’s shares.
  6. After the Cayman Islands government passed an amended bill, foreign individuals who have a net worth of US$7.3 million (KYD6 million) can apply for a Residential Certificate for Investment. This certificate gives the individual the right to reside in the Cayman Islands for up to 25 years, but the individual is expected to abide by a number of laws, including:
     • Investing US$2.9 million (KYD2.4 million) in businesses whose workforce consists of at least 50% local Caymanians;
     • Passing regular tests to confirm the financial stability of their businesses and their managerial role in their business;
     • The Residential Certificate for Investment costs US$24,000 (KYD20,000) and also allows the individual’s spouse and dependents to reside on the islands.
  7. Cayman companies are widely used in international capital markets as listing vehicles. For example:
     • Many Nasdaq listed companies are Cayman Islands corporations. For example, when China’s Alibaba went public in the United States, they formed a Cayman Islands holding company that was used in the IPO; and
     • Cayman Islands is one of the limited number of jurisdictions that are permitted for listing on the Hong Kong Stock Exchange; and
     • Shares in Cayman companies are listed on stock exchanges in London (LSE and AIM), Toronto and Singapore, amongst others; and
     • Due to the international nature of companies, the Cayman Islands has not sought to introduce its own securities laws. As such there are no additional specific regulatory requirements that a company has to satisfy or meet under Cayman law prior to listing; and
     • The Cayman Islands Stock Exchange (CSX) which has “recognised stock exchange” status from the UK HM Revenue and Customs provides a listing facility for offshore mutual funds, specialist debt securities, global depositary receipts, derivative warrants and Eurobonds; and
     • The CSX currently has listed more than 7,390 securities and maintains a market capitalization of more than US$804 billion. The exchange was granted “approval” status by the London Stock Exchange allowing securities listed on the exchange to be regarded as international equity market securities.

  Problems with doing business in Cayman Islands

  1. Starting from 1 January 2024, company annual fees in the Cayman Islands which remained largely unchanged over a decade, will be increased. Below are the details of this price hike. Please note that all figures are in local currency:
     

     Type	Lower Share Capital	Upper Share Capital	Current Annual Fee	New Annual Fee
     Companies - Exempt	0	42,000.00	700	825
     	42,001	820,000.00	1,000	1,125
     	820,001	1,640,000.00	1,984	2,109
     	-	>1,640,000.00	2,568	2,693
     Companies - Non-Resident	0	42,000.00	675	800
     	-	>42,000.00	915	1,040
     Companies - Foreign			1,350	1,550
     Limited Liability Companies			800	1,000
     SPC Cell fees			300	400 (up to a maximum of $6,000)

  2. The Cayman Islands is internationally perceived as an offshore tax neutral jurisdiction. In February 2020 and because of its failure to implement ‘economic substance’ requirements on local companies, the Cayman Islands was added to the European Union’s (EU) tax non-cooperative jurisdictions blacklist; and
  3. Foreigners may only purchase Cayman property through an ordinary resident company and not through an exempted company. This increases the administration associated with owning real estate in the Caymans; and
  4. Because the Cayman Islands has no taxes of its own, it has not concluded many double taxation avoidance treaties. Consequently, Cayman Islands companies are not the most tax-efficient holding companies; and
  5. The process of opening a bank account in Cayman Island may be more challenging. This is because banks classify businesses operating in a tax neutral jurisdiction as a high-risk client. Therefore, there is a requirement of additional due diligence documents and a higher standard of requirement for their application to be accepted. Furthermore, the opening of a bank account takes around 4 weeks which is considerably longer.
  6. Caymans Islands companies may be negatively perceived by i) customers and suppliers and ii) international Governments and iii) investors and iv) international banks.
  7. Clients looking to do conduct their business physically in Cayman Islands may find the jurisdiction unattractive for business due to the high cost of living in the country. Despite the tax breaks, the high cost of living may nullify this benefit entirely due to high wages and high basic living costs.