‘Tax haven’ is a phrase that is often thrown around in the media and politics, and incorrectly assigned to the Cayman Islands. Cayman does not meet any of the tax haven definitions set out by the OECD, Transparency International or Tax Justice Network. It does not offer tax incentives designed to favour non-resident individuals and businesses.
Cayman imposes no income, capital gains, payroll or other direct taxation on corporations or individuals resident in the Cayman Islands. Taxes are, however, imposed on most goods imported to the Islands and stamp duty (especially on direct and indirect transfers of Cayman Islands real estate) represents a significant amount of taxation in the Cayman Islands. Through this tax system, total Government tax revenues, as a percentage of GDP, are similar to tax rates in G20 countries and are sufficient to fund Government operations. This makes additional, direct taxation unnecessary.
Cayman signed its first Mutual Legal Assistance Treaty with the USA in the 1980s and now has tax information exchange agreements with 36 jurisdictions; Cayman participates in the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, which allows tax information exchange with more than 140 countries; facilitates an automatic data exchange as part of the European Union Savings Directive; and has adopted US FATCA, UK FATCA and the OECD’s Common Reporting Standard.
‘Tax haven’ is a phrase that is often thrown around in the media and politics, and incorrectly assigned to the Cayman Islands. Cayman does not meet any of the tax haven definitions set out by the OECD, Transparency International or Tax Justice Network. It does not offer tax incentives designed to favour non-resident individuals and businesses. Cayman does not have differing tax rates for foreign entities, nor does it have legal mechanisms or treaties (such as double taxation agreements) in place with other countries that (legally) effect the transfer of tax bases from one country to another in order to reduce taxes. Cayman does not promote itself as a jurisdiction for aggressive tax planning.