Working in the Cayman Islands, especially in financial services and tourism, is about being in a first-world environment while enjoying the year-long tropical climate, white sand beaches and warm, crystal-clear sea. Working in Cayman can be particularly rewarding as earnings and any gains from investments are tax-free.
Nevertheless, as the Cayman Islands are a tax neutral jurisdiction, it is strongly recommended that all new residents looking for employment here take the following steps:
1. Seek tax advice in your home country
The tax authorities in Canada, the UK and the US treat income differently when their residents are physically working outside of the country. All newcomers to Cayman should determine if it is advantageous to transfer savings and investments to Cayman or keep them at home. It is also very important to determine how long you need to be a non-resident before securing tax-free benefits, if it is possible at all. Tax legislation is continually changing, so it is imperative to have the latest information before making decisions on investing. For example, in the UK you have to be a non-resident for one full tax year in order to avoid tax on income. US citizens are liable to be taxed on worldwide income, irrespective of where that income is physically earned, although you may be eligible for a foreign earned income exclusion, which is adjusted each year based on the inflation rate. Canadian citizens have to prove that they have severed ties with Canada to avoid paying tax.
2. Establish a local bank account
As soon as is practical after arrival in the Cayman Islands, a local bank account should be established. This will enable you to have a cheque book and a debit card. Local ATMs accept both local and foreign debit and credit cards. A note regarding chequing accounts: most local banks impose significant monthly and transaction fees on chequing accounts unless fairly significant average balances are maintained. Certain banks for example, point out to new customers that the bank maintains the payment details of several hundred local merchants and service providers. This, together with easily accessible online banking, can mitigate the need for having a chequing account, since bills may be paid electronically. In this instance, customers are granted savings accounts in either US$ or CI$. (Note: banks in Cayman are strictly regulated by the Government-run Cayman Islands Monetary Authority (CIMA), which has the regulatory and oversight functions of a central bank. There is no equivalent in Cayman to the US Federal Deposit Insurance, which means that deposits are not protected if a bank should be declared bankrupt.)
3. Consider the establishment of an investment account
This will enable new residents to take advantage of some of the other services that banks offer, such as investment advice, brokerage services and, for those with significant assets, discretionary investment management.
4. Arrive prepared to meet local requirements for establishing banking and investment relationships
Local due diligence calls for having readily available (original) documents that confirm the personal identity and other particulars of an applicant. The requirements vary with each institution, but generally include two forms of identification, confirmation of residential address, a bank reference, professional reference (both addressed to the bank in Cayman) and evidence of the source of funds. For a full and detailed list of requirements see the Money and Banking section.
5. Consider regularly converting CI$ or US$ denominated earnings to the home country currency
If planning to return to a country that is not US$ denominated, consider converting CI$ or US$ denominated earnings to the home country currency on a regular basis. If all of your savings are in CI$ and you only convert it upon returning to the home country, it is possible that exchange rates could move adversely and negatively impact the value of your savings once converted into your home currency.
6. Factor into investment planning an eventual return to the home country.
At that time, it’s not advisable to liquidate all investments held locally and repatriate the funds. To make the appropriate decision at that time, it is very important to be fully aware of your individual tax situation and what you are legally allowed to do. Whilst in Cayman, it may be advantageous to establish a Cayman-registered company or Cayman-registered trust to own investments; these could potentially provide tax advantages upon returning to the home country. Most local banks in the Cayman Islands have a trust department that can provide expert guidance and they will advise on the best strategy based on each client’s personal situation. However, please see the Domicile & Tax section before establishing a trust, as you might trigger inheritance tax if it is done too soon.