A Note on Tax and Relocating to the Cayman Islands
The Cayman Islands as a tax-free haven is an idea which is popular by the International media. But what does that mean for you exactly? That elephant in the room, specifically the issue of tax and relocating to the Cayman Islands is worth addressing as you start exploring the possibilities of moving here.
Let’s start by establishing a simple definition of what tax actually is.
The definition of tax by the Merriam Webster dictionary is
“A charge usually of money imposed by authority on persons or property for public purposes.”
So Why do the Cayman Islands have the reputation of being tax free?
In the Cayman Islands, we have no:
- Income taxes
- Corporate taxes
- Annual Property taxes
- State or Council taxes
- Capital Gains taxes
- Inheritance taxes
All of which makes the Cayman Islands an attractive place to live, do business, and work.
So, Is the Cayman Islands Tax-Free?
Based on the standard definition given above, the answer to this is No. Though the structure of taxation in the Cayman Islands is different from many countries. While there is no direct taxation imposed by the Government, other duties and charges are levied by the Cayman government to fund its expenditure and maintain the modern, beautiful, and safe reputation the Cayman Islands enjoys.
Some of the Main Duties and Charges you might Encounter in the Cayman Islands:
One of the primary sources of government revenue in the Cayman Islands are Customs Duties. These are consumption-based duties levied on every import into the Cayman Islands at a rate of between 22% to 30%. This duty is one reason why consumer goods in Cayman can be more expensive than you’ll find in many other places. The Customs and Border Control law exempts a few specific items like cameras or glasses from tax, however, in contrast, other luxury items like luxury cars can attract duties of up to 42%.
Stamp duties are a one-time tax payable on all transfers of real estate. It is calculated as 7.5% on the property’s purchase price, excluding the value of its chattels (furnishings). Stamp duties are also payable on specified instruments.
Work Permit Fees
Employers pay work permit fees for each foreign employee. The fee amount is determined by the job title of the individual and the work permit’s duration.
Permanent Residence Fees
Individuals applying for permanent residence in the Cayman Islands pay a residency permit fee.
Trade and Business Licence Fees
Every person carrying on a trade or business in the Cayman Islands must pay an annual trade and business licence fee.
Government Administration Fees
Almost every transactional encounter with a Government department in the Cayman Islands will incur an administrative fee.
Tourist Accommodation and Timeshare Tax
Tourist visitors to the Cayman Islands pay a tourist accommodation tax calculated as 13% of the gross room rate.
So what’s the upshot for tax and relocating to the Cayman Islands?
1. In the planning phases of your relocation, and well before you leave your country of origin, ensure that you consult with a knowledgable tax professional to discuss your short-term and long-term goals and get advice on your overall tax position. Giving due consideration to tax and relocating to the Cayman Islands at the start of the process can help highlight tax issues that might need to be addressed early on. (Hint: This is just one of the to do items on our free Relocation Planner. Click the link to download.
2. You should also ensure that all your tax obligations are met and concluded before you move or can be managed in your absence. These articles are extremely helpful to understand your tax status if you’re relocating to the Cayman Islands as a tax citizen of the UK or the moving here as a tax citizen of the USA.
3. The tax structure may result in your annual tax filings being less onerous and generally more straightforward than before (unless you continue to have tax obligations in other countries).
4. Overall, your tax liability may be less than you before. It’s worth running the numbers and creating a budget for your life in Cayman for additional clarity of your position.
5. And absolutely yes, it does make for a more stress-free life from a tax perspective.
We can help you think through all issues that might affect you like tax and relocating to the Cayman Islands and put you in touch with our network of offshore tax specialists.
Contact our experienced team on the ground to help you plan and manage your move to the Cayman Islands.