Preface: As a self-governing British Overseas Territory, the Cayman Islands have diversified their economy beyond tourism, successfully developing the finance services sector. This strategic shift has reduced dependence on the volatile tourism industry, making the Cayman Islands the fifth largest banking center globally. With over 100,000 registered companies, surpassing the local population, it’s a thriving hub for businesses
Our comprehensive service package encompasses:
1.Company registration with the General Registry
2.Local company secretary and registered address services
3.Seamless corporate bank account opening
4.Expert assistance with financial license applications
5.Annual accounting and tax services
WHAT IS A TAX HAVEN AND ARE THE CAYMAN ISLANDS A TAX HAVEN?
Tax havens, as the name suggests, are typically characterized by low or even zero tax rates, and they are sometimes linked to illicit activities like tax evasion. The concept of a tax haven often includes elements such as confidentiality, political stability, economic stability, and a favorable business environment for foreign investors.
The Cayman Islands have gained notoriety as one of the prominent tax havens in recent years. In fact, former U.S. President Barack Obama referred to them as a “tax scam” in a statement made in 2016. Traditionally, the Cayman Islands have offered tax-free status on various forms of income, including corporate and personal income, property, capital gains, and withholding taxes.
Despite being included in the European Union tax haven blacklist in February 2020, the Cayman Islands were subsequently removed from the list in October 2020. However, this decision faced criticism from various international watchdog organizations and governments, including figures like Oxfam’s EU tax policy advisor and the Chief Executive of the Tax Justice Network. The Tax Justice Network even ranked the Cayman Islands second on their 2021 Corporate Tax Haven Index. Regardless of official classifications, it’s evident that establishing an offshore company in the Cayman Islands would strongly associate it with the concept of tax havens and banking secrecy.
WHAT ARE THE NEW ECONOMIC SUBSTANCE REQUIREMENTS AND HOW DO THEY AFFECT COMPANIES AIMING TO REGISTER COMPANY IN CAYMAN ISLANDS?
To eliminate these associations, the Caymanian government introduced The International Tax Co-operation (Economic Substance) Law in 2018, which aligns with the OECD’s Forum on Harmful Tax Practices. Its primary objective is to establish an economic substance test for specific corporate entities intending to register a company in the Cayman Islands and evaluate their legitimacy. Effective as of January 1, 2019, legal entities must maintain a certain level of economic substance.
So, who needs to adhere to these new requirements when registering a company in the Cayman Islands? The majority of locally incorporated corporations fall under this new law’s purview. This includes locally incorporated companies, limited liability companies, limited liability partnerships, and registered foreign companies.
The legislation covers company structures engaged in various activities, such as banking, distribution and service centers, financing and leasing, fund management, headquarters, holding companies, intellectual property, insurance, or shipping. These entities are required to undergo the economic substance test.
However, there are exceptions. Company structures like limited partnerships, investment funds, and Cayman entities that are tax residents elsewhere are not obligated to comply with this law. Insurance companies are also exempt from this regulation.
Entities subject to this law must submit their initial report to the Tax Information Authority. This report includes specific details outlining how they have satisfied the test within twelve months after the entity’s first fiscal year-end. Through this evaluation, authorities will determine if the core income-generating activities related to the company are conducted within the Cayman Islands.
To comply with this law, a company must:
1.Conduct its primary income-generating activities within the Cayman Islands.
2.Be managed and directed domestically from within the Cayman Islands.
3.Depending on the income earned from the specific activity, spend a sufficient amount on operating expenses within the Cayman Islands.
4.Maintain a physical presence in the Cayman Islands, such as a company location, factory, equipment, land space, or other physical assets.
5.Employ an adequate number of full-time qualified personnel based in the Cayman Islands.
Non-compliance with this new law can result in monetary penalties and removal from the General Registry.
Before beginning the engagement process, Fionza Consultants will assess whether you need to adhere to the economic substance regulations based on your intended commercial activities. If required, our team will assist in establishing a local office and recruiting local employees to ensure compliance.
HOW LONG DOES IT TAKE TO SET UP A COMPANY IN CAYMAN ISLANDS AND OPEN A CORPORATE BANK ACCOUNT?
Once we receive the necessary due diligence documents from the directors and shareholders, our team conducts a name search with the Cayman Islands General Registry to reserve your preferred company name.
To file your application, companies are required to go through an established financial or business service provider, and Fionza Consultants will provide you with the necessary support for this.
Our dedicated professionals at Fionza Consultants aim to complete the company registration process in the Cayman Islands within a swift 2-week timeframe.
Within the same 2-week period, you can anticipate receiving essential documents for your new company, including your Company Registration Certificate and the Memorandum and Articles of Incorporation.
Following a successful company formation, Fionza Consultants will further assist you in opening a business account with a bank of your choice. This process typically takes around 4 weeks to complete.
From the start of your engagement with Fionza Consultants, you can expect to commence operations with your Caymanian company within 6 weeks.
For ongoing compliance and peace of mind, our team of Chartered Accountants is equipped to provide a comprehensive suite of services. These services encompass monthly bookkeeping, preparation of fiscal statements, and annual tax return filings, ensuring that your newly incorporated company remains in strict adherence to all regulations.
CAN A FOREIGNER REGISTER COMPANY IN CAYMAN ISLANDS?
Foreign entrepreneurs are welcomed to start businesses in the Cayman Islands, with the government not only permitting but actively encouraging 100% foreign ownership.
Incorporating companies in the Cayman Islands is a straightforward process with minimal requirements. There is no residency mandate for directors, which simplifies the process and makes it highly accessible for foreign individuals and businesses looking to establish a presence in the region.
HOW TO REGISTER COMPANY IN CAYMAN ISLANDS?
We strongly recommend that you review this guide to gain a comprehensive understanding of the steps involved in the process.
Step 1: Choosing the Right Company Structure Before proceeding to register a company in the Cayman Islands, our dedicated team of consultants will work closely with you to assess your company’s objectives and activities. Based on your specific needs, business activities, tax obligations, and the nationalities of your shareholders and directors, we will recommend the most suitable company structure. We’ll also advise you on the optimal paid-up share capital, company structure, relevant legislations, and whether any licenses are required to operate. In most cases, Fionza Consultants often recommends incorporating an exempt company.
Step 2: Reserving Your Company Name Prior to initiating the registration process, Fionza Consultants will conduct a search with the Cayman Islands Registrar of Companies to reserve your preferred company name through the Cayman Islands General Registry.
Step 3: Preparing Supporting Documents To facilitate the incorporation of your company, you will need to provide us with the required Know Your Customer (KYC) documents, including director names and identification proof. Once we have received all necessary documents, Fionza Consultants will proceed to draft and notarize the company’s Memorandum and Articles of Association, a crucial step in the registration process. Depending on your business activity and structure, we will also prepare articles of incorporation, a business plan, and other necessary incorporation documents. If your industry falls under regulation, approval from the Cayman Islands Monetary Authority may also be required.
Step 4: Filing for Registration Complying with local laws, incorporation necessitates the appointment of a registered agent and a registered office. Fionza Consultants will provide you with both of these essentials. After engaging Fionza Consultants to register your company in the Cayman Islands, we will proceed to file the necessary registration forms and certificates with the General Registry for approval. Once approval is granted, you will receive your Cayman Islands company registration number, and we will promptly courier the Certificate of Incorporation, Memorandum and Articles of Association, and other pertinent documents to your preferred address.
Step 5: Applying for Trade or Business Licenses If your business operates in a regulated industry such as banking or insurance, our team of dedicated consultants will assist you in obtaining the necessary approvals from the Cayman Islands Monetary Authority. For those looking to incorporate an exempt company while maintaining trade activities, our consultants will guide you through the process of obtaining a license under the local Trade and Business Licensing Law from the Department of Commerce and Investment.
Step 6: Corporate Bank Account Opening Following the successful registration, Fionza Consultants will facilitate the process of opening a corporate bank account. Leveraging our established partnerships with reputable banks in the Cayman Islands, we will introduce your company to each relationship manager and compliance team. Our experienced banking team will efficiently secure banking solutions within the specified timelines. Typically, the bank account opening process takes approximately 4 weeks, and in most cases, directors and shareholders are not required to travel. However, if travel is necessary, we can arrange for a representative to accompany you to the bank meeting. Alternatively, we can negotiate with the banks to conduct a conference call or request a waiver. Once your account is successfully opened, Fionza Consultants will courier the internet banking token and access codes to your preferred address.
Step 7: Financial Reporting and Taxation Obligations Following the establishment of your new company, our dedicated team of consultants will continue to support your business by ensuring all necessary services for your company’s successful operation are diligently managed. Per local regulations, companies are required to submit an annual return to the Registrar of Companies, providing details such as the names and addresses of members and directors, as well as the amount of paid-up capital. Additionally, an annual company licensing fee of CI$800 applies. We will provide annual reminders to ensure you remain compliant with these regulatory obligations, allowing your new company to conduct business legally and efficiently.”
(Note: “CI$” refers to the Cayman Islands dollar.)
When completing the incorporation process, the following essential documents and personal documentation may be required:
1.Certificate of Incorporation: This document signifies the formal establishment of the company. In cases where there has been a change of the company name, a Certificate of Change of Name (if applicable) will also be necessary.
2.Certificate of Good Standing (if applicable): If the company has been established for over 12 months, a Certificate of Good Standing may be required as part of the documentation.
3.Memorandum and Articles of Association: These documents outline the company’s structure, purpose, and operational guidelines.
4.Register of Directors and Officers: A record of the company’s directors and officers, including their personal details, may need to be provided.
5.Register of Members and Shareholders: This record contains information about the company’s members and shareholders, including their ownership stakes.
6.Personal Documentation for Authorized Signatories: Documents verifying the identity of individuals authorized to sign on behalf of the company.
7.Personal Documentation for a Minimum of Two Directors: Personal identification and related documentation for at least two directors of the company.
8.Personal Documentation for All Voting/Management Shareholders with Holdings of 10% or More: Personal documentation for individuals holding 10% or more of the company’s shares who are involved in its management or decision-making processes.
These documents are crucial for the proper registration and compliance of your company, and they may be subject to specific requirements and regulations in the Cayman Islands.
TYPE OF BUSINESS ENTITIES IN THE CAYMAN ISLANDS
For most businesses in the Cayman Islands, the requirements are relatively straightforward. You’ll typically need a director and shareholder of any nationality, a local registered address, and a registered agent. Importantly, there’s no minimum required capital for incorporation. The primary legislation governing corporate entities in the Cayman Islands is the 1961 Law On Companies.
Here are some key business entity options available in the Cayman Islands:
1.Exempt Company: This special type of company has fewer compliance requirements. Exempt companies aren’t obligated to maintain a public registry of members, hold annual general meetings in the Cayman Islands, or face restrictions when amending their Memorandum and Articles of Association.
2.Exempted Limited Partnership: Suited for service-based businesses, this entity is exempt from local taxes. It comprises general and limited partners, with at least one general partner being a local resident.
3.Limited Liability Company (LLC): A separate legal entity that can conduct offshore operations, an LLC doesn’t require share capital. Members or managers can manage the company, and filing requirements include a registration statement and annual returns.
4.Resident Company: Owned by Caymanian residents, these companies can operate within the Cayman Islands. They must maintain a public registry of members and submit annual reports.
5.Non-Resident Company: Non-resident status is granted by the Minister of Finance. These companies can’t conduct local business but can engage with local companies for foreign business purposes.
6.Foreign Company: Companies incorporated outside the Cayman Islands can register to hold land, do business in the Cayman Islands, or act as a general partner.
7.Special Economic Zone Company: Designed for foreign investors, this entity can only operate within the Cayman Special Economic Zone, offering tax-neutral benefits and reduced customs and trade certificate fees.
8.Unlimited Company: Unlike an LLC, an unlimited company doesn’t shield investors from personal liability for company debts.
9.Foundation Company: Introduced in 2017, this entity functions like a civil law foundation, with limited liability and a separate legal personality. It’s versatile and can be used for various purposes.
10.Excluded Person Financial Company: Similar to exempt companies, these entities require minimal director and shareholder information and cater to excluded persons investing in securities.
When establishing any of these entities, it’s crucial to consider accounting and tax obligations.
Fionza Consultants can handle your accounting needs, ensuring compliance with local laws and meeting all deadlines. For instance, CIMA-regulated businesses like banks and insurers must prepare and file financial statements.
In the Cayman Islands, tax compliance is minimal, with exemptions from value-added, corporate income, withholding, and real property taxes. Instead, companies typically pay duty fees at varying rates.
For specific guidance and support in choosing and establishing the right business entity in the Cayman Islands, trust Fionza Consultants to simplify the process and ensure your success.
WHY REGISTER COMPANY IN CAYMAN ISLANDS?
Before embarking on the process of opening a company in the Cayman Islands, it’s essential to gain a comprehensive understanding of the business landscape in this jurisdiction. This knowledge will ensure that your newly established entity can operate safely and legally while aligning with your long-term business objectives.
The Cayman Islands operates under a parliamentary democracy system closely linked to and influenced by the United Kingdom, providing a stable and secure political climate.
The government of the Cayman Islands has enacted the Special Economic Zone Law to promote economic growth and attract foreign investments through various concessions.
The Cayman Islands offers low annual fees and company incorporation costs, making it cost-effective to register a company here, allowing you to allocate more of your budget to business growth.
Special economic zones in the Cayman Islands provide businesses with jurisdictional benefits and lower regulatory costs, making them an attractive option for international expansion.
Setting up a business bank account may encounter delays due to enhanced due diligence checks conducted by banks’ compliance teams.
Some third-party investors may be cautious about investing in projects through tax haven companies due to concerns about credibility and reputation.
The Cayman Islands boasts a high literacy rate of 98.9% among its population, with English as the official language, facilitating communication for businesses.
The Cayman Islands has a relatively low population of 65,813 people and an economy heavily dependent on tourism, which may not be ideal for businesses requiring a larger consumer base or a skilled labor force.
Tech City Cayman houses leading companies in various cutting-edge technology sectors, making the Cayman Islands digitally competitive.
The FinTech industry is steadily growing in the Cayman Islands, offering state-of-the-art technological tools for financial businesses.
The Cayman Islands Tech Community is expanding and nurturing young talents to join the technology industry.
Incorporation procedures in the Cayman Islands are straightforward and quick, with your new company ready for business operations within a day.
Unlike many other jurisdictions, businesses in the Cayman Islands are not required to submit certain documents such as shareholder registries or meeting minutes. There is also no obligation for annual shareholder meetings or audit reporting. Privacy policies protect The Register of Directors and Officers and the Register of Shareholders, providing greater privacy.
The implementation of the Mutual Legal Assistance Treaty enhances compliance and assists international law enforcement agencies in reviewing Cayman Islands companies for legitimacy.
The Cayman Islands are leaders in marine conservation and sustainability, with initiatives to reduce single-use plastics and upcycle materials.
Energy sourcing in the Cayman Islands relies heavily on non-renewable sources, making the jurisdiction vulnerable to energy shortages in case of disruptions in oil shipments.
Challenges in waste management are evident, as highlighted by the George Town landfill (Mount Trashmore), indicating a need for improved waste management mechanisms.
In summary, a thorough understanding of the political, economic, social, technological, legal, and environmental factors in the Cayman Islands is crucial for informed business decisions.
Contact us now to learn more about how to register a company in the Cayman Islands and take the first step toward your business goals.