Taxation System in the Cayman Islands
Updated on Saturday 11th November 2017
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The Cayman Islands is considered a tax haven for investment funds. This jurisdiction offers numerous tax exemptions for investment vehicles, thus becoming an attractive destination for investment purposes. The Cayman Islands does not impose the tax on personal or corporate income and investment funds are also exempted from paying the capital gains tax. Investors interested in how to start a fund in the Cayman Islands may also apply for a tax exemption certificate (an optional procedure), which can be issued following the payment of a specific fee ($ 1,890.27).
Tax legislation for Cayman Islands funds
As mentioned above, the investors of a fund registered in the Cayman Islands can obtain a tax exemption certificate, which will grant specific advantages. The certificate will provide the investors the right to be exempted from the payment of specific taxes for a period of 20 years and the regulation also states that this aspect will be applicable regardless if the local legislation concerning taxation will be modified in the respective period of time.
However, investors interested in how to start an investment fund in the Cayman Islands should know that the above mentioned legal aspect is available as long as the vehicle is registered as an investment company.
Still, the natural persons representing the investment fund registered in the Cayman Islands will be imposed with specific taxes (on income and gains) in the country in which they are tax residents. The taxes will be applied for the financial benefits they obtain from the fund operating in the Cayman Islands, but certain exemptions are available in this situation.
Taxation of hedge funds in the Cayman Islands
One of the manners through which foreign businessmen can open a fund in this country is by setting up a hedge fund start-up. As a general rule, hedge funds in the Cayman Islands will be registered as a company, a unit trust or a limited partnership.
The above mentioned structures are not required to pay the following taxes:
• corporate tax;
• capital gains tax;
• income tax;
• profit tax;
• withholding tax.
Other tax regulations are applicable for vehicles, depending on the type of fund investors have opted for. More information on this subject can be provided by our team of affiliates in the Cayman Islands and businessmen are invited to address to our partners for in-depth assistance.