About the jurisdiction
- The Cayman Islands is one of the British Overseas Territories in the Caribbean Sea and well-known offshore financial center. The capital is George Town. The official language – English. The national currency – Cayman Islands dollar (KYD).
- The Cayman Islands are notable for political stability, comfortable conditions for business registration, the developed banking, corporate and legal services sector, as well as tourism.
- The law of the Cayman Islands is based on English common Law.
- No corporate and personal taxation.
- No exchange control and capital flow restrictions.
The main features of the Cayman Islands companies
Below you will find the main characteristics of the Cayman Islands companies illustrated by an Exempted Limited Company – the most typical offshore tool in the Cayman Islands.
- Company formation and management are governed by The Companies Law of the Cayman Islands.
- Exempted companies are used as classic offshore companies, i.e. they are exempt from taxation and may not run business within the territory of the Islands.
- The companies may engage in any business not prohibited by the laws of the Cayman Islands. The specific objects of a company may be set forth in its organizational documents.
- Names of exempted companies of the Cayman Islands have no endings like “Limited”, “Ltd.”, “Corp.”, “Inc.” etc. The information on the companies’ legal form may be found in organizational documents.
- Company names cannot be identical or closely similar to the existing companies incorporated in the Cayman Islands. Using the words “Royal”, “Imperial”, “Empire”, “Municipal”, “Chartered”, “Cooperative”, “Assurance”, “Bank”, “Insurance” and alike is restricted and demands prior consent from the Registr.
- A company must have a registered office in the Cayman Islands (which is the same with the one of local registered agent).
- A Company must have at least one shareholder (an individual or a legal entity of any residency) and at least one director.
- Nominee shareholders are allowed.
- A local registered agent acts as the initial subscriber of the company’s organizational documents (at incorporation) and subscribes for at least one share to be issued. After incorporation of the company the shares are transferred from the initial subscriber to the shareholder declared by the client.
- There are no requirements for amount of share capital (either authorized or paid-up). The standard amount of share capital usually is USD 50 000 with the number of shares 50 000. The capital may be expressed in any currency. Shares may be issued either with nominal value or without it.
- Issue of bearer shares in the Cayman Islands is prohibited by law as from 13 May 2016. Bearer shares that existed for that moment had to be converted into registered shares not later than by 13 July 2016. The previous version of the Companies Law allowed issuance of bearer shares, however provided for a custodial mode for them (a special keeping conditions) restricting their free turnover.
- Annual general meetings of shareholders are not required (unless otherwise is prescribed by the company’s Articles).
- The law allows redomiciliation (continuation) of Cayman Islands companies to other jurisdictions, and vice versa – of companies from other jurisdictions to the Cayman Islands.
Specifics of registration and maintenance of Cayman Islands companies
- An option of expedited registration of a company in the Cayman Islands within 24 hours.
- Hague Convention 1961 is applicable in the Cayman Islands, therefore corporate and other documents issued in the Islands and destined for submission abroad may be attested with Apostille.
- The cost of registration and annual maintenance of the Cayman Islands companies is on average slightly higher than in other ‘classical’ offshore jurisdictions (Belize, BVI, Seychelles etc.).
- Annual fee for all companies is to be paid at the same time – in the beginning of a calendar year (see the details below).
- Online check of authenticity of certificates and company organizational documents issued by the Registry is available. To check a document, you need to enter a file number and authorization code of the document.
Taxation and annual fees
The Cayman Islands have no corporate profit tax, withholding taxes, capital gains tax, value added tax, as well as no personal income tax, property tax and inheritance tax. The sources of public revenue include stamp duty, import duties, and company registration and annual fees.
Companies may obtain from the Cayman Islands Government a written guarantee of their tax-free status for a 20-year period (that may be extended up to 30 years) in the event if any taxes are introduced in future.
An exempted company must pay annual fee in January of each year following the year of its incorporation. The amount of the fee depends on the amount of company’s registered capital (i.e. the capital which the company is authorized to issue according to its organizational documents).
|Amount of annual fee||Amount of annual fee|
|Amount of registered capital||KYD||USD|
(the amount may fluctuate slightly due to current exchange rate)
|less than 42 000 KYD (less than 51 219.65 USD)||700||853.66|
|from 42 000 to 820 000 KYD||1 000||1 219.51|
|from 820 000 to 1 640 000 KYD||1 984||2 419.51|
|more than 1 640 000 KYD||2 568||3 131.71|
A company which fails to pay the annual fee incurs the following penalties:
- 33,33% of the amount of annual fee if it is paid between 1 April and 30 June;
- 66,67% of the amount of annual fee if it is paid between 1 July and 30 September;
- 100% of the amount of annual fee if it is paid between 1 October and 31 December.
There are no requirements for preparation and filing of financial statements (as well as for their audit). A company may voluntarily arrange preparation of financial statements and audit in accordance with its Articles.
However, a company must keep its books of account, including underlying documents (contracts, invoices) related to:
- any amounts received and paid by the company, as well as circumstances in which such receipts and expenditures took place;
- all sales and acquisitions of the company;
- assets and liabilities of the company.
Such documentation must correctly reflect the company’s state of affairs, explain its transactions and must be kept for at least 5 years.
A company which keeps its books of account at the address other than the address of its registered office, in case of receipt a request from a tax information authority, must provide access to such documents in electronic or other form at the address of its registered office to the extent specified in the request. Failure to fulfil such request entails a fine of USD 5000 and further penalties of 100 USD for each day of non-compliance.
The only type of report required from exempted companies to be filed with the Registry is a simple annual return in the form of declaration stating that:
- no amendments have been made to the company’s Memorandum of Association from the moment of its registration (or from the time of submission of the previous annual return);
- in the said period the company have carried out its activities primarily outside the Islands;
- the company complied with the restrictions for doing business with individuals and companies within the territory of the Cayman Islands, except entering into contracts and exercising of powers necessary for conducting business outside the Islands (section 174 of the Companies Law).
In case of late submission of the annual return a company incurs fines, and then, in case of failure to file, may be struck-off from the Register.
Information on directors, shareholders and beneficial owners of the Cayman Islands companies is not available to public and in ordinary circumstances is available only to a registered agent, professional intermediary and bank maintaining the company’s accounts. Access to such information may be provided upon request of the regulator, law enforcement authorities or on the basis of court decision.
In 2017 the Companies Law was amended with new requirements related to keeping of beneficial ownership registers (part XVIIA of the Companies Law). Pursuant to them a company must keep its beneficial ownership register at the address of its registered office (and keep it up-to-date).
The register must contain the full name, resident address, correspondence address (if differs from the resident address), date of birth, passport data (ID number, country and date of issues, date of expiry), date in which that person became or ceased to be a registrable person.
The register is not publicly available, however a registered agent (a corporate service provider) will be obliged to provide the competent authority with access to information from such register through a special secure search platform.
International tax cooperation
Despite the image of one of the oldest ‘classical’ offshore jurisdictions, the Cayman Islands for today are among the jurisdictions which are highly compliant with the international standards of cooperation in tax sphere.
Convention on Mutual Administrative Assistance in Tax Matters 1988, as amended by the Protocol 2010 is in force for the Cayman Islands from 1 January 2014 (due to participation of the United Kingdom).
The Cayman Islands have 27 tax information exchange agreements (TIEA) in force, including with the USA and a number of the EU countries. They also have one (and the only) agreement for avoidance of double taxation with the United Kingdom, which also provides for information exchange between the competent authorities.
The Cayman Islands have signed the Multilateral Competent Authority Agreement for automatic exchange of financial account information (MCAA) under Common Reporting Standard (CRS). As on February 2018 the Cayman Islands activated their commitments on automatic exchange with 57 countries.
Finally, the Cayman Islands have an agreement with the USA on implementation of FATCA (US Foreign Accounts Tax Compliance Act) which entered into force on 1 June 2014.
The Cayman Islands and cryptocurrency business
As was mentioned above, the Cayman Islands companies possess general legal capacity and may carry out any business not prohibited by law. The existing legal frameworks for the companies in Cayman Islands are flexible enough and allow to develop businesses connected with cryptocurrencies.
The fact is that almost all existing legislation (in Cayman Islands as well as in most of other countries), including the laws governing financial markets and IT sector, was enacted before the beginning of rapid growth of Blockchain technologies, cryptocurrencies and ICO (Initial Coin Offering). That is why the current legislation of the Cayman Islands does not require from those who plan ICO obtaining a special registration or license from the regulator.
At the same time, such activities as money services business, which include in particular money transfer and currency exchange services, are subject to licensing in the Cayman Islands. Therefore, using cryptocurrency and tokens as a payment facility raises a question of a possible qualification of such activity as ‘money services business’ within the Islands (with the relevant duties to be licensed and follow the regulations). The Regulator – The Cayman Islands Monetary Authority (CIMA) – has not given any opinion on this matter yet.
The applicability of the existing rules for money services business depends on the nature and characteristics of each specific ICO, as well as of the main business, and, relying upon the existing legal framework, the likelihood of applying the current norms of Money Services Law to the majority of ICOs is insignificant.
Similar questions may appear regarding applicability of the following laws of the Cayman Islands to cryptocurrency business:
- Mutual Funds Law;
- The Securities Investment Business Law;
- The Proceeds of Crime Law and Anti-Money Laundering Regulations;
- Electronic Transactions Law.
However, any conclusion as to whether the ICO issuer falls within the scope of any regulatory framework under the existing laws of the Cayman Islands (with the relevant duties), must be based on thorough analysis of facts and the nature of activity and their correspondence with the definitions of the law.
The companies that carry out ICO may face the following potential risks:
- Undetermined vector of possible legal regulation of cryptocurrencies (both in the Cayman Islands and from the outside – on the level of other interested states and on international level);
- Compliance risks in the context of anti-money laundering legislation. For the purposes of AML/CFT laws the activity with cryptocurrencies may be qualified as ‘relevant financial business’, and ICO issuers can therefore be obliged to implement the relevant AML procedures (client identification, record keeping, internal control etc.);
- The possible influence of the Cayman Islands’ commitments under OECD CRS, FATCA and the regime of beneficial ownership registers on cryptocurrency business demands a special analysis (as they may create additional administrative burden for companies).
Notwithstanding all of the above, the Cayman Islands today are among the favorable jurisdictions for crypto-businesses and structuring of ICO.