Taxes in the Cayman Islands for Businesses in 2024: What You Need to Know

The Cayman Islands continue to offer a unique and attractive tax environment for international businesses, with zero direct taxes such as corporate income tax, personal income tax, and capital gains tax. However, in 2024, several regulatory changes and fee adjustments have been introduced, making it crucial for businesses to understand the updated costs and compliance requirements. This article provides a detailed look into the current tax landscape, annual fees, and compliance obligations to help businesses navigate this premier offshore jurisdiction effectively.

General Information on Taxes in the Cayman Islands

The Cayman Islands do not impose direct taxes but generate revenue through various fees, duties, and levies:

• Import Duties: Most imported goods are subject to import duties ranging from 22% to 27%. Businesses should factor in these costs when importing goods or raw materials.
• Stamp Duty: Property transactions are taxed at a standard rate of 7.5%, applicable to both residential and commercial property purchases.
• Work Permit Fees: Work permit fees are determined by the employee’s skill level and job position, ranging from KYD 500 (USD 600) for low-skilled roles to KYD 20,000 (USD 24,000) annually for executive positions.

These fees serve as a significant source of revenue for the government and are applicable to both local and foreign businesses.

Corporate Taxation

Despite the absence of corporate taxes, companies must be prepared to handle annual registration and compliance costs:

• Annual Registration Fees: Depending on the company type and share capital, annual registration fees range from KYD 825 to KYD 4,500 (USD 990 to USD 5,400). These fees have been adjusted slightly as of 2024 to support enhanced services by the Companies Registrar​.
• Economic Substance Compliance: Companies conducting “relevant activities” (e.g., banking, insurance, fund management) must comply with economic substance regulations. This includes demonstrating physical presence and local operational activity. Compliance costs can range from KYD 20,000 to KYD 100,000 (USD 24,000 to USD 120,000) annually, depending on the business scale and complexity​.
• CIMA Fees: Entities registered with the Cayman Islands Monetary Authority (CIMA), such as mutual funds and private funds, must pay annual licensing fees. Late payment penalties apply if fees are not paid by 15 January each year​.

Individual Taxation

There is no personal income tax in the Cayman Islands, allowing business owners and expatriates to retain 100% of their earnings. However, certain costs must be considered:

• Health Insurance and Pension Contributions: Employers must provide mandatory health insurance and pension contributions for all employees. Monthly health insurance costs can range from KYD 200 to KYD 1,500 (USD 240 to USD 1,800) per employee, while pension contributions are typically set at 5% of the employee’s salary.
• Work Permit Fees: Foreign employees must obtain work permits, with fees determined by the employee’s position and skill level. High-level professionals and senior management roles attract significantly higher permit fees, often exceeding KYD 10,000 (USD 12,000) annually.

Regulatory Compliance

Compliance with local regulations and international standards is mandatory for all businesses operating in the Cayman Islands:

• Economic Substance Reporting: Companies that conduct relevant activities must submit an Economic Substance Notification (ESN) annually, followed by an Economic Substance Return (ESR) if they meet certain criteria. Filing deadlines vary depending on the company’s financial year-end​.
• Beneficial Ownership Reporting: All entities must maintain and report beneficial ownership information unless they qualify for an exemption. Non-compliance can lead to significant penalties.
• AML and KYC Requirements: Compliance with Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations is enforced by the Cayman Islands Monetary Authority (CIMA). This requires ongoing audits, reporting, and internal compliance measures.

Setting Up a Business

Establishing a business in the Cayman Islands involves several key steps and fees:

1. Choosing a Business Structure: Available options include exempted companies, limited liability companies (LLCs), and partnerships. Exempted companies are the most popular choice for international businesses.
2. Company Registration Fees: Initial registration fees for exempted companies range from KYD 1,000 to KYD 5,000 (USD 1,200 to USD 6,000). Registration must be completed through the General Registry Department​.
3. Annual Return and Compliance Fees: All companies must file an annual return and pay the corresponding fees by 31 January each year. Late payment results in penalties accumulating quarterly​.

Pros and Cons of Doing Business in the Cayman Islands

Pros:

• No direct corporate or personal taxes, providing a tax-efficient environment.
• High level of financial privacy and asset protection.
• Strong legal framework based on English common law.

Cons:

• High cost of living and operational expenses, including work permits and healthcare.
• Ongoing compliance requirements, particularly for regulated entities.
• Limited availability of skilled local workforce, leading to high costs for expatriate employees.

Conclusion

The Cayman Islands continue to be a leading choice for international businesses seeking a tax-neutral base. While the absence of direct taxation is highly advantageous, companies must be prepared for substantial compliance costs and regulatory requirements. For businesses that can navigate these complexities, the benefits of operating in the Cayman Islands often outweigh the costs.