Mostly known as a tax haven, the Cayman Islands stands out as a reputable business destination chosen by foreign investors due to the favorable business climate. Although the country is considered a tax haven, this jurisdiction provides a high level of trust as it follows international tax regulations. With more than 90,000 companies incorporated here, the Cayman Islands has gained popularity as a respected business destination.
The legislation in the Cayman Islands regarding the incorporation and the operation of a local company is given by the Companies Law 1961; the legal system in this country is rooted in the English common law and, with regards to the company types that can be registered here, businesses can be set up as sole traders, partnerships or corporate structures (in this latter case, it means that there is a legal distinction between the company’s founder and the company itself, which benefits from a separate legal entity).
Corporate entities can be formed as Cayman exempted companies, which are generally used by investors who want to start an offshore activity, or as limited liability companies. One of the advantages of opening a company in the Cayman Islands which is a corporate entity is the fact that the investors will be protected against the debts of their business.
In the case of those who want to open a business as a limited liability company in the Cayman Islands, the main rule of law that has to be observed is the Limited Liabilities Companies Law. The main advantage of starting this business structure is given by the fact that its founders are not required to deposit a share capital; it is important to find out that this business form became applicable under the above mentioned law starting with 2016.
As a general rule, the basic advantages for opening a company in a foreign jurisdiction are related to the tax system applicable to a structure. An LLC in the Cayman Islands is exempted from a set of taxes, as they are not applicable under the tax legislation in this country. In this sense, investors must know that the following tax exemptions are currently available:
- the taxation of the company’s profits;
- the taxation of the company’s income and dividends;
- no capital gains tax;
- no real estate taxes;
- no inheritance taxes.
Under the legislation that became applicable in 2016, the LLC in the Cayman Islands is an attractive business structure as it combines the characteristics of a corporate entity with the ones of a partnership. The structure also benefits from flexible regulations concerning the control its investors can have on the company, which can be freely established under the LLC agreement, the statutory document of this company type.
The Yucatan Times