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Taxation of a Cayman Islands Company

Updated on Monday 07th January 2019

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Taxation-of-a-Cayman-Islands-Company.jpgThe Cayman Islands are one of the most popular offshore centers and one of the countries that are considered a tax haven. This is possible because of the tax-free regime applicable in the Islands. More specifically, the fact that there is no applicable profits tax for the income derived by a registered company. The taxation of a Cayman Islands company is virtually inexistent as there is no corporate tax.
 
A Cayman Islands exempted company is a very attractive legal entity that is not subject to corporate taxation and thus no tax assessments and that has a simplified incorporation procedure. These characteristics, coupled with the fact that the Islands are easily accessible for many investors from the United States, make the Cayman Islands an attractive place to incorporate an offshore business.
 

Are Cayman Islands companies completely tax exempt?

 
The Cayman Islands laws allow the location to be a tax haven through the fact that there is no corporate income tax, no payroll tax or capital gains tax and no other direct taxes for companies. 
 
The Cayman Islands tax system is one of the most advantageous for investors. The list below summarizes some of its characteristics, more specifically the types of taxes that are not imposed on companies:
  • - no corporate income tax: there is no taxation on company profits, therefore no corporate income tax.
  • - no dividend taxes: there are no taxes imposed on the dividend income received by a Cayman Islands company from a foreign source; 
  • - no withholding taxes: not only are dividends not subject to a withholding tax, but this also applies to interest and royalty income.
  • - no VAT: the value-added tax is not imposed in the Cayman Islands, thus no filing or registration is needed.
  • - stamp duty: this is a type of tax that can be imposed on property or land transfers and for the purpose of drawing up some types of documents; one of our Cayman Islands incorporation agents can help you with more information.
 
Apart from these taxes that are not applicable, investors should also know that the distribution of shares by foreign shareholders (the profits made on the disposal of shares by a foreign shareholder) is not taxable in the Cayman Islands.
 
While there are no taxes on company profits, the annual licensing of a company incorporated here should be taken into consideration as part of the general management expenses for investors who open an offshore company. The licensing fee is payable to the government and will depend on the authorized share capital of the company. One of our Cayman Islands company formation agents can give you more details on the applicable licenses, especially the Cayman Islands Monetary Authority requirements for investment fund licensing. 
 

Are the Cayman Islands a tax haven?

 
Yes. Generally speaking, because of the fact that they do not impose taxes on company profits or other types of direct taxes, the Cayman Islands are one of the tax havens usually preferred by investors. The Islands are preferred by investors worldwide not only because of their taxation regime but also because of the high degree of confidentiality they allow for investors who choose to set up a company here. However, entrepreneurs should know that the Cayman Islands have signed several tax information exchange agreements with countries worldwide and are also part of the Foreign Account Tax Compliance Act imposed by the United States.
 
One of our agents who specialize in Cayman Islands incorporation can give you more information about how these laws may concern you.
 

What are other advantages of doing business in the Cayman Islands?

 
Low company incorporation and management requirements are another reason why the Cayman Islands are a popular location for opening an offshore company. The Cayman Islands exempted company is the most widely-used business form and it can be incorporated by one director who is not bounded by any nationality or residency requirements. The details concerning the company directors and shareholders are not publicly available and neither and the financial statements of the company. Moreover, investors who want to maintain a high degree of confidentiality can use nominee director and nominee shareholder services. 
 
The exempted company has no requirements for a minimum capital or a currency in which it should be subscribed. Because the Cayman Islands taxation regime does not include the usual direct and indirect taxes, there is no need for exempted companies to file a complex annual return or annual accounts with the tax authorities; a very simple annual return suffices.
 
One of our Cayman Islands company formation agents can give you more details on the particularities of the tax regime as well as the advantages for foreign investors. Contact us for complete information as well as assistance throughout the incorporation process.
 

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