Located in the northwestern Caribbean, the Cayman Islands have two well-known identities – a diving destination and the world's fourth-largest offshore financial centre. Registering a company here, commonly known as an offshore company, means that you do not need to conduct substantive business in the place of registration, and the local government has no personal income tax, corporate income tax, capital gains tax, real estate tax and other taxes for such companies, and only charges a small annual management fee, which has the characteristics of a high degree of confidentiality, tax burden reduction, and no foreign exchange control.
As a result, this British colony, which covers an area of less than 260 square kilometers, is home to a staggering number of foreign-registered companies. The world's 25 largest banks have subsidiaries or branches in Cayman. The total assets of the island's financial and trust industries have exceeded $250 billion.
The main reason why this small island nation is so attractive is its financial policy. In 1978, the Cayman Islands were granted permanent exemption from tax obligations by Royal Decree. In this way, the Cayman Islands does not impose any direct taxes on either individuals or companies. What's more, there is no foreign exchange control here, and various currencies can enter and exit freely, and can also be freely exchanged and traded here. Because of this, hundreds of thousands of companies from all over the world have chosen to register in the Cayman Islands, and American companies are especially frequent visitors to the islands. Large companies such as Procter & Gamble, Apple, Microsoft, Google, Intel, Coca-Cola, and others have registered subsidiaries in Cayman and transferred profits to these subsidiaries through a series of complex financial paths, thereby avoiding up to 35% of the U.S. corporate income tax. No wonder Obama said bitterly: "This is not the world's largest office building, but the biggest tax evasion camp." ”
But with so many companies flocking to the Cayman Islands, there are no dense rows of office towers on the islands. Because, to register a company in the Cayman Islands, you only need to pay a registration fee to the government, and you don't necessarily need to have an office here, often you only need to have a mailbox address in the Cayman Islands. Because of this, on South Church Street in Georgetown, a five-story building called Aglan House turned out to be the registered home of nearly 20,000 businesses, becoming the "largest" and most dense office building in the world.
Why does the Cayman Islands enjoy tax exemptions?
It is said that on February 8, 1794, 10 British merchant ships ran aground on a coral reef at the eastern tip of the Cayman Islands, and the Cayman residents went to sea to rescue them, so that 58 crew members of the merchant ship were able to escape, including the British prince. In gratitude to the Caymanians, the King of England decreed that the inhabitants of Cayman Island were permanently exempt from taxes and conscription. The Cayman Islands has become a wealthy island with so many tourists visiting each year and so many companies receiving registration fees, with the highest GDP per capita in the Caribbean. Previously, Asian billionaire Li Ka-shing reorganized his two groups and moved the registered place of the restructured company from Hong Kong to the Cayman Islands, saying that this move was just for the convenience of doing business. In fact, the Cayman Islands has long become an important "settlement" for Chinese enterprises. From Country Garden and Shimao Real Estate in the real estate industry, to sports brands Li Ning and Anta, to Internet giants such as Alibaba and Baidu, many well-known companies are registered enterprises in the Cayman Islands.
In the past 20 years to 2015, 44 of the 50 largest family businesses listed on the mainland in Hong Kong were registered in the Cayman Islands.
In 2009, 1,145 companies were listed in Hong Kong and 388 were registered in Cayman in the first eight months of 2010, and 44 companies were listed in Hong Kong and 31 were registered in Cayman
1
Basic information
The Cayman Islands is a British overseas possession in the northwestern Caribbean Sea, with an area of only 259 square kilometers and a population of less than 60,000. Finance and tourism are the main sources of economy.
2
Famous offshore company registration place
The Cayman Islands, the British Virgin Islands and Bermuda are known as one of the three major offshore domiciles, and most of the island's financial revenue comes from this part.
3
The world's fourth-largest offshore financial center
According to reports, the reason why Li Ka-shing registered the reorganized new company in the Cayman Islands is because the reorganization transaction volume is huge, and it involves the distribution of physical shares of the new company, which is not allowed for companies registered in Hong Kong according to the relevant laws and regulations of Hong Kong. Since 2010, Li Ka-shing has made a large number of overseas investments, with a focus on Europe in various sectors such as infrastructure, telecommunications, and energy, and the relocation of the company to the Cayman Islands will help further expand overseas M&A projects.
4
An average of 4,300 companies are established every year
According to some data, an average of 4,300 companies are incorporated in the Cayman Islands every year, more than 700 banks in the world have branches in the islands, including subsidiaries of the world's 25 largest banks, and the total assets of the island's financial and trust industries have exceeded $250 billion.
5
Loose policies, convenient operation, listing "springboard"
If an enterprise needs to introduce foreign capital or list overseas, it can complete the overseas financing of the domestic company by registering an overseas company in the Cayman Islands, acquiring 100% of the equity of the domestic company, and then submitting the Cayman company to Hong Kong or the United States for listing. In particular, industries such as the Internet, education and media, which have restrictions on the introduction of foreign investment in China, are more attractive. The advantages of this indirect listing are: lower cost, transparent listing process, shorter time spent, and the ability to avoid complex approval procedures in China.
6
Service Advantages
World-renowned law firms, such as Maples and Calder, have dedicated offices in Cayman and a dedicated Chinese practice group to help Hong Kong and mainland companies develop offshore corporate strategies.
7
Flexible cash flow
There are no foreign exchange controls in the Cayman Islands, allowing businesses to be more flexible in their funds in international transactions.
8
The approval process is relaxed
The Cayman Islands is relatively lenient in terms of approval processes such as listing approval and annual filing.
9
The registration policy is relaxed
At the age of 18, you can register a limited company with a registered capital of only 50,000 US dollars and no capital verification. At the same time, the company does not need to conduct substantive business in the place of registration, and only charges a small annual management fee.
10
A veritable tax haven
There are few types of taxes, and the only taxes on the Cayman Islands are simple taxes such as import tax and industrial and commercial registration tax. The Cayman Islands were granted permanent exemption from tax obligations by Royal Decree in 1978 and are therefore completely free from direct taxation.
Annual declaration of registered directors
01 Scope of application of the Act
The Act applies to directors of the following covered entities:
1. Individuals and entities that serve as directors of companies regulated by mutual funds under the Mutual Funds Act
2. Company director who is registered with CIMA in accordance with the Securities Investment Business Law
3. Persons and entities acting as limited liability companies incorporated in the Cayman Islands under the Limited Liability Companies Act
Type of Director
The types of directors are as follows:
Registered Director – a natural person who serves as a director of less than 20 covered entities
Professional Director – a natural person who serves as a director of 20 or more covered entities
Directors of a company – a body corporate appointed as a director of a covered entity
According to the Act, persons who fall under the category of registered directors, regardless of whether they reside in Cayman or not, are required to file an annual return with CIMA on time and pay the corresponding annual fee by 15 January.
03 Key information in the declaration
During the registration or filing process, registered directors are required to provide the following details:
1. Full name, date of birth, country of birth, and nationality
2. Principal place of residence and postal address
3. Details of any conviction involving fraud, dishonesty and other offences
4. Details of any negative reviews, financial penalties, scandals, sanctions, or disciplinary actions from regulators, self-regulatory organizations, or professional disciplinary bodies
5. The name and registration number of the covered entity that the applicant will represent
04Information Security
Information provided as part of the registration or licensing process is not currently available to the public.
In order for the public to confirm whether the entity is registered or licensed under the Act, the information available to the public is limited to:
1. Name
2. The type of registration or license held
3. Registration or license number
4. The date on which the registration or license was obtained
05 Penalties for breach of contract
Under the provisions of the Act, a person or entity that has not yet been a director of the entity in question is required to apply for the appropriate registration or licence before being appointed, and a director who fails to register with CIMA and obtain a license in accordance with the relevant regulations will be guilty of an offence. Conviction carries a hefty fine or imprisonment for up to 12 months.
Under the Monetary Authority Act, CIMA has the power to impose hefty administrative fines of up to 1 million (approximately US$1.2 million) in CIhmans.
All in all, for the normal operation of the Cayman company, and in order to avoid the adverse effects of the directors being subject to administrative penalties and other related adverse effects, it is necessary to make the annual declaration of the directors of the Cayman company in a timely manner according to the actual situation.
Cayman company registration process
01 Cayman company advantages
1. High security and confidentiality
The Cayman Islands has provisions in place that favour confidentiality for locally incorporated IBCs, with minimal disclosure
Second, the business environment is good
There is no foreign exchange control in Cayman, corporate funds can be flexibly mobilized, and offshore laws are also very sound, and the policies are relaxed. Infrastructure such as financial services courts, lawyers, and accountants also has advantages, making it easy to set up group structures, restructuring, and overseas listings. In particular, the purpose of overseas financing of domestic companies is completed by registering an overseas company in the Cayman Islands, then acquiring 100% of the equity of the domestic company, and then submitting the Cayman company to Hong Kong or the United States for listing.
3. Preferential tax system
The Cayman Islands is completely tax-free, neither for individuals, companies, nor the trust industry, so the Cayman Islands is known as a real tax haven.
Fourth, the registration and maintenance is simple
Cayman company registration is very simple, the company name is flexible and less restrictive, one person can register a Cayman company without the need to go to the place of registration in person. It is enough to pay the management fee stipulated by the government every year, and there is no need to hold a general meeting of shareholders or a board of directors.
02 Conditions for the establishment of a Cayman company
1. Company composition: There are no special requirements for the company name, unless it is licensed, the company name cannot appear, TRUST, MUTUAL FUND, INSURANCE, or REINSURANCE (reinsurance).
2. Registered capital: The registered capital of a Cayman company is generally 50,000 US dollars, and the capital can be divided into 50,000 shares, each of which is one US dollar.
3. Directors and shareholders of the company: The shareholders of the Cayman company do not have any restrictions and can be natural or legal persons of any nationality.
4. Corporate taxation: After the company is established, it does not operate in Cayman, and the company does not need to declare and pay any taxes. (in addition to the annual license fee).
03Cayman company registration process
1. Determine the name of the Cayman company;
2. Provide at least one director/shareholder, who can be a natural person or a legal person, and the nationality is not limited; (In the case of a corporate enterprise: a company license is required):
3. Provide proof of residential address of directors and shareholders, i.e. receipts showing their names and residential addresses, such as utility bills or telephone bills:
4. Sign the power of attorney for the registration of the Cayman company, and provide photocopies of the ID cards or passports of all directors and shareholders and the lawyer's recommendation letter;
5. There are no special requirements for the name of the Cayman company, but unless it is licensed, the name cannot use words such as Bank, trust, Insurance, etc.;
6. The standard authorized capital is generally USD50000 yuan, which can be divided into 50,000 shares and USD1 per share.
04 Precautions for operation of Cayman company
1. Requirements for the second year after the registration of a Cayman company
There is no need to file an annual return:
Companies are not required to register their annual financial reports with the Companies Registry:
The government requires all companies to pay the annual fee for the second year by December 31 of the current year (even if the company is incorporated on December 31)
Cayman company annual audit before December 31 of each year; (Even if the company is established on December 30, it will be reviewed annually)
Please note: From December 31 to March 31 of the following year, the longer the annual audit fine is exceeded, the higher the fine.
2. Maintenance of accounting accounts
There is no requirement for Cayman exempted companies to file tax returns, and there are no detailed regulations on accounting records, but they are required to keep the company's accounting records, and the requirements are as follows: 1. Cayman companies must keep accounting records on income flows, expenses, and their assets and liabilities. 2. All accounting records must be kept for at least 5 years from the date of existence. 3. The records of the accounts are not required to be kept in Cayman territory but if they are not kept in Cayman territory, they must be inspected annually and at the time of issuance of a notice or order under the Tax Information Authority Law through their registered office. 4. A fine of $5,000 will be imposed in case of violation.
3. Cayman Islands Economic Substance Bill
Since 2019, the Cayman Islands has commenced the implementation of the International Tax Cooperation (Economic Substance) Law 2018 in accordance with the requirements of the International Organization for Economic Co-operation and Development (OECD) with the enactment of the International Tax Cooperation (Economic Substance) (Schedule Amendment) Regulation 2019.
According to the regulations enacted by Cayman, relevant entities engaged in relevant activities are required to meet the requirements of the Economic Substance Law and pass the Economic Substance Test.
Relevant entities include Cayman Islands exempted companies, foreign companies registered in Cayman, Cayman Islands Limited Liability Companies (LLCs) and Limited Liability Partnerships (LLPs).
The following nine related activities of the above-mentioned entities are subject to an economic substance test, but it is clarified that investment fund business is not included. The nine activities include:
1. Holding business
2. Fund management business
3. Headquarters business
4. Intellectual property business
5. Financing and leasing business
6. Distribution service business
7. Transportation business
8. Banking
9. Insurance business
Cayman companies are required to make economic substance declarations at the same time as the annual audit. If the company does not comply with the economic substance requirements, the company or the person in charge will be subject to coercive measures such as fines, mandatory deregistration of the company, and in serious cases, imprisonment.
(Source: Huimai International Offshore Intellectual Property and Gangsheng Business WeChat public account.) Thanks to the original author, just for knowledge sharing. ）