Learn More About The Cayman Islands’ Tax-Neutrality

The Cayman Islands' tax-neutral status offers residents freedom from all direct taxes, providing significant incentives for both business and personal financial planning. There are no income, capital gains, property, payroll, or withholding taxes. The government generates revenue through alternative means, such as fees on tourism, work permits, import duties, and financial transactions. This tax-neutral environment makes Cayman a highly desirable destination for relocating companies and attracting top talent to expand business operations.

How Cayman Stands Against Other Tax-Neutral Nations

While several jurisdictions offer tax-neutral environments to attract foreign business, Cayman's policies are notably distinct.

Bahamas Tax-neutrality vs. Cayman

The Bahamas is a popular tax haven among US and EU residents and is considered tax-neutral. There is no tax liability for offshore companies or individual bank account holders on income earned outside of the jurisdiction; however, revenue generated locally in the Bahamas is subject to tax. There are also no taxes on personal income, gifts, inheritance, or capital gains. However, unlike Cayman, residents are subject to property taxes, import duties, stamp taxes, licence fees, and value-added tax.

Bermuda vs. Cayman

Bermuda is considered by some to be tax-favourable because it does not impose an income tax. However, it does have a payroll tax, which is determined based on the size of an employer’s annual payroll and the income of individual employees. The more money earned, the higher percentage of tax that needs to be paid, which can be burdensome for growing start-ups. Bermuda also requires every self-employed individual or employer to register with the Office of the Tax Commissioner at least a week before the first tax year of business ends or face criminal charges. However, like Cayman, Bermuda has no capital gains tax, interest, dividends, investment income, or rental income tax. Foreign gains and losses or principal residence gains and losses are not taxed in Bermuda, nor are non-resident trusts.

Barbados vs. Cayman Taxation

Barbados is not technically tax-neutral as it charges income and corporate tax but is still considered favourable because of its low tax rates. Additionally, there is no import duty on necessary business equipment or machinery, no capital gains taxes, or withholding taxes. Barbados also has double taxation treaties with Canada, the US, and other countries to prevent non-residents from being taxed in both their home nation and Barbados.

Panama vs. Cayman Tax-Neutrality

Panama is known to be a favourable tax-free jurisdiction as offshore companies and their owners are not subject to local taxes, income taxes, or corporate taxes; however, local taxes apply to revenue generated by local businesses. Panama has strict banking secrecy laws, no tax treaties with other countries, nor does it have exchange control laws, meaning there is little to no requirement for money transfer reporting or shareholder reporting. As a result, Panama has received a negative reputation in the past for illegal activity, most notably with the release of the 2016 Panama Papers highlighting fraud, tax evasion, and money laundering.

Singapore vs Cayman’s Tax Structure

While not in the Caribbean, Singapore offers another attractive tax structure, especially for companies wanting to expand in the Asian market. It’s not purely tax-neutral, but it does have low taxes and other incentives. Taxpayers pay a progressive tax on personal income, but there is no capital gains tax. Corporate income tax is a flat 17%, but this can be lowered by certain incentive schemes designed for foreign business and investment.

Many tax-neutral countries have their own approach to taxation, but ultimately, Cayman is one of the best choices if you’re looking for an attractive tax structure, stable political climate, modern banking infrastructure, and transparency.

It’s this combination of a favourable tax-free environment along with well-regulated and trusted transparency that entices so many businesses to Cayman’s shores. 

To learn more about moving your business to the Cayman Islands, get in touch with CEC today and we can talk you through your options for setting up a special economic zone business.