‘Tax haven’ is a phrase that is often thrown around in the media and politics; however, it is 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 tax 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 US in the 1980s and now has bilateral tax information exchange agreements with 36 jurisdictions. Cayman also participates in the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, which allows tax information exchange with more than 140 countries. Cayman has adopted and implemented US FATCA and the OECD’s Common Reporting Standard to facilitate the automatic exchange of tax information with such jurisdictions. In addition, Cayman requires multinational enterprises which meet certain criteria to file a report with tax administrations or authorities, pursuant to its Country-by-Country Reporting regime which the Cayman Islands has implemented in accordance with the OECD/G20 Action Plan on Base Erosion and Profit Shifting (BEPS). Cayman joined the OECD/G20 Inclusive Framework on BEPS in 2017 and continues to implement and comply with BEPS global minimum standards.
‘Tax haven’ is a phrase that is often thrown around in the media and politics; however, it is 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) affect 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.