September 21, 2020

Maples and Calder: From Private Client International Comparative Guide

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Nigel Porteous Tony PursallBy Nigel Porteous and Tony Pursall

1 Pre-entry Tax Planning

1.1 In the Cayman Islands, what pre-entry estate and gift tax planning can be undertaken?
There are no estate or gift taxes in the Cayman Islands.

1.2 In the Cayman Islands, what pre-entry income tax planning can be undertaken?
There is no income tax in the Cayman Islands.

1.3 In the Cayman Islands, can pre-entry planning be undertaken for any other taxes?
There are no other relevant taxes.

2.1 To what extent is domicile relevant in determining
There is no direct taxation in the Cayman Islands.

2.2 If domicile is relevant, how is it defined for taxation
purposes?
This is not applicable in the Cayman Islands.

2.3 To what extent is residence relevant in determining liability to taxation in the Cayman Islands?
There is no direct taxation in the Cayman Islands.

2.4 If residence is relevant, how is it defined for taxation
purposes?
This is not applicable in the Cayman Islands.

2.5 To what extent is nationality relevant in determining liability to taxation in the Cayman Islands?
There is no direct taxation in the Cayman Islands.

2.6 If nationality is relevant, how is it defined for taxation
purposes?
This is not applicable in the Cayman Islands.

3 General Taxation Regime

3.1 What gift or estate taxes apply that are relevant to persons becoming established in the Cayman Islands?
There are no gift or estate taxes in the Cayman Islands.

3.2 How and to what extent are persons who become established in the Cayman Islands liable to income tax?
There is no income tax in the Cayman Islands.

3.3 What other direct taxes (if any) apply to persons who become established in the Cayman Islands?
There are no other direct taxes in the Cayman Islands.

3.4 What indirect taxes (sales taxes/VAT and customs & excise duties) apply to persons becoming established in the Cayman Islands?
When taking up residence in the Cayman Islands, personal belongings moved within the first six months of residence are not subject to duty, within the following provisions: (i) all items imported are used personal belongings that are over six months old, including computers, household goods and furniture (proof of purchase may be required if this is in question); and (ii) vehicles, alcohol and tobacco are not included in the duty exemption. Generally speaking, import duty is 22% of the sum of the market value of the possession, and the insurance and shipping costs of delivery to its destination in the Cayman Islands. Certain items, such as alcoholic beverages and luxury motor cars, suffer higher rates of import duty.

3.5 Are there any anti-avoidance taxation provisions that apply to the offshore arrangements of persons who have become established in the Cayman Islands?
There are no anti-avoidance taxation provisions in the Cayman Islands.

3.6 Is there any general anti-avoidance or anti-abuse rule to counteract tax advantages?
No, there is not.

4 Taxation Issues on Inward Investment

4.1 What liabilities are there to direct taxes on the remittance of assets or funds into the Cayman Islands?
There is no direct taxation in the Cayman Islands.

4.2 What taxes are there on the importation of assets into the Cayman Islands, including excise taxes?
Dutiable items accompanying the owner on his or her arrival in the Cayman Islands are exempt from duty as to the first CI$350 (approximately US$420). This tax-free exemption does not apply to goods imported that are not accompanied by the owner on his or her arrival or re-entry to the Cayman Islands. Unaccompanied
imports suffer import duty, generally speaking, at 22% of the value plus shipping and insurance. Certain categories are zero or lower rated; most commonly the items also for sale in the duty-free stores for the cruise ship passenger trade as well as, for example, some necessities. Equally, luxury items, such as alcoholic beverages and
motor cars above a certain value, suffer higher rates of duty.

4.3 Are there any particular tax issues in relation to the purchase of residential properties?
There is no particular tax involved in the purchase of residential properties in the Cayman Islands other than a one-time stamp duty at time of purchase, which is 7.5% of the purchase price.

5 Succession Planning

5.1 What are the relevant private international law (conflict of law) rules on succession and wills, including tests of essential validity and formal validity in the Cayman Islands?
The Cayman Islands laws on succession largely follow the English law approach. Under Cayman Islands law, the applicable law for the succession of the property of a deceased person is his domicile. The Cayman Islands’ test for establishing a person’s domicile is the same as the English law test: the domicile of the individual’s father at the date of birth (domicile of origin) which continues to apply unless replaced by migrating to a new jurisdiction with the positive intention of making that jurisdiction the permanent home (domicile of choice). Having established domicile as a matter of Cayman Islands law, movable property follows the succession laws
of the jurisdiction of domicile at death. The requirements for formal validity of a will are set out in the Wills Law; summarised, the will has to be in writing, signed by the testator in the presence of two witnesses present at the same time and in his presence, who also sign. The testator must intend by his signature to give effect to the will. Concerning essential validity, the testator has to have the necessary
testamentary and mental capacity, he has to know and approve the contents of the will, he must not be subject to any undue influence and there must be no component of fraud and no component of forgery. Testamentary or mental capacity requires the testator to be of sound mind, memory and understanding. He must, therefore, be
capable of forming the testamentary intentions, his memory must be sound to recall the persons who ought to be considered as his likely beneficiaries and he has to be able to understand the ties of those people to him by blood or friendship and their claims on these or other grounds on his testamentary generosity. Undue influence
follows the English test, that is, “influence” does not mean that the testator was persuaded to make his will in a certain way for reasons that other people might consider foolish or inappropriate. Undue influence in this context means coercion to the extent that the will does not reflect the actual intentions of the testator. To seek
to declare a will essentially invalid on grounds of fraud or forgery requires a very high degree of proof.

5.2 Are there particular rules that apply to real estate held in the Cayman Islands or elsewhere?
Regardless of the domicile of the deceased, if the deceased owns real estate, whether in the Cayman Islands or elsewhere, Cayman Islands law will apply the laws of succession of the jurisdiction where the property is located to the question of the succession to that property (lex situs).

6 Trusts and Foundations

6.1 Are trusts recognised in the Cayman Islands?
Yes, trusts are recognised in the Cayman Islands.

6.2 If trusts are recognised in the Cayman Islands, how are they taxed in the Cayman Islands?
There is no direct taxation in the Cayman Islands. There is nominal stamp duty (rarely more than US$50) on certain deeds and other documents executed in connection with trusts.

6.3 If trusts are recognised, how are trusts affected by succession and forced heirship rules in the Cayman Islands?
The Cayman Islands has specific statutory provisions that cover conflicts of laws concerning trusts. That legislation also addresses, and declines to give effect to, attempts to set aside a trust merely on the grounds that the terms of the trust may defeat a forced heirship claim of a disappointed heir of the settlor. There are no forced heirship rules under Cayman Islands law.

6.4 Are foundations recognised in the Cayman Islands?
Foundations in the sense generally understood in civil law countries do not exist as such in the Cayman Islands. A foundation from a civil law country that largely resembles a company or corporation, that is, it has a separate legal personality, it can own property and sue and be sued, is likely to be recognised in the Cayman Islands as a legal person similar to a foreign company. Some charitable trusts and charitable companies are named “foundation” in the Cayman Islands, but they are either a trust or a company if they are governed by Cayman Islands law. They are not foundations as understood in civil law jurisdictions.

6.5 If foundations are recognised, how are they taxed in the Cayman Islands?
There is no direct taxation in the Cayman Islands.

6.6 If foundations are recognised, how are foundations affected by succession and forced heirship rules in the Cayman Islands?
Foundations as they are understood in civil law jurisdictions cannot be created as such in the Cayman Islands.

7 Immigration Issues

7.1 What restrictions or qualifications does the Cayman Islands impose for entry into the country?
Besides the system of entry under a work permit, to gain entry to the Cayman Islands as a resident, a person must be a Caymanian national, have the right of permanent residence or hold a Certificate of Residency as a person of independent means or a person who has directly invested in the Islands, the requirements of each are outlined below in question 7.2. To gain the right of permanent
residence, a person must have been legally and ordinarily resident in the Islands for at least eight years and have fulfilled certain other specified criteria as determined by the Caymanian Status & Permanent Residency Board. The Immigration Law of the Cayman Islands is currently under legislative review and may be amended in the near future.

7.2 Does the Cayman Islands have any investor and other
special categories for entry?
There are two special categories for entry and they are a Residency Certificate for Persons of Independent Means (“IM Certificate”) and a Residency Certificate of Direct Investment (“DI Certificate”). A person may apply for an IM Certificate if they are at least 18 years old, have no serious criminal convictions, are in good health with adequate health insurance and must not be in need of engaging in employment in the Cayman Islands. In addition, if they wish to reside in Grand Cayman, they must have a continuous source of annual income in the amount of CI$120,000 and have invested CI$500,000 in Grand Cayman, of which at least CI$250,000 must be in developed residential real estate, and in the other two Islands the applicant must have a continuous annual income of CI$75,000 and have invested the sum of $250,000 locally, of which at least $125,000 must be in developed real estate. Alternatively, a person may apply for a DI Certificate if he has invested or proposes to make an investment of at least one million dollars in an employmentgenerating
business in the Cayman Islands. The DI Certificate would allow the holder to reside in the Cayman Islands permanently with their families and to work in the business or businesses in which they have invested for up to 25 years and it is renewable or
extendable at the end of this period.

7.3 What are the requirements in the Cayman Islands inorder to qualify for nationality?
There are two main processes by which a person may obtain the right to be Caymanian. The first is through a connection to the Islands by virtue of birth or marriage. The second way is by applying to the Caymanian Status & Permanent Residency Board for Caymanian Status. To qualify for this process, a person must be: (i) a permanent resident; (ii) naturalised as a British Overseas Territories Citizen
(“BOTC”); and (iii) legally and ordinarily resident in the Islands for at least five years after the grant of BOTC. If a person is granted Caymanian Status, he will have the full rights and benefits of a Caymanian, including the right to vote, the right to have a Cayman Islands’ passport and to reside permanently in the Islands.

7.4 Are there any taxation implications in obtaining nationality in the Cayman Islands?
There is no direct taxation in the Cayman Islands.

8 Taxation of Corporate Vehicles

8.1 What is the test for a corporation to be taxable in the
Cayman Islands?
There is no direct taxation in the Cayman Islands.

8.2 How are branches of foreign corporations taxed in the
Cayman Islands?
There is no direct taxation in the Cayman Islands.

9 Tax Treaties

9.1 Has the Cayman Islands entered into income tax and capital gains tax treaties and, if so, what is their impact?
There are no income taxes or capital gains taxes in the Cayman Islands. The Cayman Islands has entered into a number of tax information exchange agreements and, strictly speaking, only one double tax treaty, with the United Kingdom.

9.2 Do the income tax and capital gains tax treaties generally follow the OECD or another model?
There are no income taxes or capital gains taxes in the Cayman Islands.

9.3 Has the Cayman Islands entered into estate and gift tax treaties and, if so, what is their impact?
There are no estate or gift taxes in the Cayman Islands.

9.4 Do the estate or gift tax treaties generally follow the OECD or another model?
There are no estate or gift taxes in the Cayman Islands.

www.iclg.co.uk iclg to: PRIVATE CLIENT 2015
© Published and reproduced with kind permission by Global Legal Group Ltd, London

Nigel Porteous
Maples and Calder
PO Box 309, Ugland House
South Church Street
Grand Cayman KY1-1104
Cayman Islands
Tel: +1 345 814 5175
Fax: +1 345 949 8080
Email: [email protected]
URL: www.maplesandcalder.com

Tony Pursall
Maples and Calder
11th Floor, 200 Aldersgate Street
London EC1A 4HD
United Kingdom
Tel: +44 20 7466 1625
Fax: +44 20 7466 1700
Email: [email protected]
URL: www.maplesandcalder.com

MAPLES
With almost 50 years in the industry and over 700 staff, Maples and Calder is a leading international law firm advising global financial, institutional, business and private clients on the laws of the Cayman Islands, Ireland and the British Virgin Islands.
Maples and Calder is known worldwide for the quality of its lawyers. This extensive experience, the depth of the team and a collegiate approach are main characteristics of the firm, enabling it to provide the highest quality legal advice on a wide range of
transactions.
Maples and Calder offices are located in the British Virgin Islands, the Cayman Islands, Dubai, Dublin, Hong Kong, London and Singapore. The service provided is enhanced by the strong relationships the firm has developed. For fiduciary and fund services requirements, the firm provides a seamless, “one stop shop” capability through its affiliate, MaplesFS.

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