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Cayman : NOT a tax haven

Cayman : NOT a tax haven

Posted by: Paul
Category: Cayman

Cayman is a transparent, tax neutral jurisdiction and is not a tax haven.

International policymakers continue to recognize the vital role Cayman’s financial services industry
plays as a strong international partner in combating corruption, money-laundering, terrorist financing
and tax evasion.

Cayman meets or exceeds all globally-accepted standards for transparency and cross border
cooperation with law enforcement. This commitment to global transparency standards makes Cayman
a very unattractive destination for would-be tax evaders.

A review of the definitions of a tax haven used by leading transparency organizations contrasted
with the real legal, regulator y and legislative basis for the Cayman Islands financial services industry
clearly demonstrates Cayman is a transparent, tax neutral jurisdiction and not a tax haven.

Tax Neutral

While Cayman adds no additional tax to financial services transactions in its jurisdiction, investee
entities as well as investors are still subject to their home jurisdictions’ relevant taxes. In addition,
Cayman meets or exceeds all globally-accepted standards for transparency and cross border
cooperation with tax authorities and law enforcement.

The importance of maintaining Cayman’s tax neutral status can be illustrated by considering what
would happen were Cayman to introduce direct corporate tax on profits of e.g. Cayman Islands
alternative funds. This would reduce returns to investors (including UK investors) in those funds
and, consequently, reduce the taxes that those investors (including UK investors) would in turn be
liable to pay in their home jurisdiction (including in the UK). It would also unfairly disadvantage
the many investors in Cayman Islands alternative funds who are private and government pension
funds, charities and not-for-profit organizations that are not subject to tax in their home jurisdiction
(including in the UK).

Cayman has adopted automatic exchange of tax information with relevant authorities in other
countries. Under the OECD’s Common Reporting Standard (“CRS”) and US FACTA regimes, both of
which have been implemented in the Cayman Islands, Cayman proactively shares tax information
with other governments – a level of transparency which essentially assists them in the collection
of their own taxes, regardless of what their unique tax laws are.

Cayman’s Globally Responsible, Effective Tax Regime

Like all other jurisdictions, Cayman has the right to establish a tax regime that collects the right
taxes from the right people at the right time within its jurisdiction. Unlike other jurisdictions,
Cayman has chosen to use fees and other taxes instead of an across-the-board corporate income
tax.

Cayman’s globally responsible tax regime meets or exceeds the revenue targets used by other
leading countries around the world, generating government taxation revenue equal to approximately
22% of our GDP (2016). It’s a taxation revenue raising system that works well for our jurisdiction
and ver y adequately funds our government operations and keeps our debt-to-GDP ratio modest.
Tax evasion is unlawful and the Cayman Islands does not support it.

Cayman has in place all globally-accepted standards for transparency and cross border cooperation
with tax authorities and law enforcement.

Cayman does not have any double taxation agreements (or treaties) that could be used to unfairly
shift tax base from another country y to Cayman. (It should be noted that, technically, Cayman
has signed a DTT with the UK, but it is merely the form in which the UK preferred to have its
tax information exchange agreement with Cayman executed and the agreement provides no tax
benefits to Cayman as Cayman does not have any taxes covered by the agreement.)

This responsible approach to taxation is central to the Cayman Model and a distinguishing feature
of our jurisdiction among International Financial Centres (“IFCs”) many of which have extensive
double tax treaty networks.

Originally published by Cayman Finance https://cayman.finance/

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