The anatomy of the Cayman Islands offshore financial center (2016)
tandfonline.com
tandfonline.com
I know a lot of people in the finance & professional services here, and I think what's missing from this analysis is how Cayman bends over backwards to make it _easy_ to do business here (especial finance).
It's tax neutral but fully transparent to and compliant with UK, US, EU, and Singaporean (as well as many others). This means if you're operating a hedge fund (as an example) with high net worth clients and private investments globally you're generally able to hugely minimize the amount of paperwork to not be double-taxed. It also lets you run financial instruments which might be subject to tax while operating, rather than when earnings are captured and released. And yet, it does that without being on any global watch lists.
Financial courts here move _fast_, often ruling and concluding in weeks. And precedents are generally British Common Law (unless improved by Cayman). Starting a company is easy, and fees cover pretty good support. I have a Caymanian company, and when I had a question recently about identification regulations on non-voting shareholders I could call a number and get both a quick answer and great advice from a human being.
It's worth noting that Cayman has virtually no Crypto because of the above. We've actually tried, but no significant crypto company has been willing to subject itself to the relatively lightweight regulations. The biggest crypto startup on the island is a crypto regulatory compliance tooling company, which says a lot.
Anyhow, I'm not a lawyer or accountant, butt AMA I guess if anyone is curious about my home! :)
(It's also an amazing place to live, I love it here. Hard to recommend though because residency is notoriously hard to get if you're eligible through ancestry.)
Can you comment on how easy it is for non-residents to open up a company?
Important: IANAL!!!
You can open what's called a "Cayman Islands exempt" company, which can exist here in Cayman jurisdiction but which cannot do business in Cayman (basically don't compete with Caymanians in Cayman). This is generally how holding and investment companies are structured. _However_, this doesn't shield you from either personal taxes or visibility. Cayman is much more transparent than, say, Delaware. And if the book value of investments grows and you're American the IRS will find you quickly (if you have any assets in Caymanian banks they'll report your activity to US authorities regularly, even without a warrant or request.). KYC here is no joke, it took me a month to open a bank account here and I'm a permanent resident with Cayman parents.
Since this is HN though, you may be interested in a "fully remote" company with no real home - that works quite well here. You can pay contractors anywhere without holdbacks or forms and let them be responsible for their taxes (be aware of Nexus rules though, it's not foolproof.) You'll generally be responsible for taxes in the countries where you book income from that country, but (consult a lawyer) not always for SaaS. The biggest advantage IMO is that you'll be able to cut your paperwork down enormously because Cayman just doesn't care about the flows of money (so long as it's documented for laundering/tax avoidance reasons). Nothing to file, nothing to pay.
Finally, let me plug the good folks at Cayman Enterprise City. https://www.caymanenterprisecity.com/. They will set you up to actually have an office and presence here (in a really nice building downtown!), they can give some light legal advice and guidance, and if you have employees anywhere in the world who want to relocate to paradise they can get them a visa in a day or two to move here.
So yeah, it's "easy", it's not terribly useful for tax mitigation directly, it's (in my admittedly biased opinion) one of the best places in the world to anchor a truly global startup.
If you can share more context I can try to be more helpful? But likely the next step is an actual professional accountant/lawyer.
It might be possible if you're a resident of UK or a different BOT? (British Overseas Territories).
If you'd like to ask around, generally the most flexible bank is Butterfield. I'd start there.
Our biggest business here isn't tourism, it's finance and professional services. Our differentiator is being one of the only "legit" tax neutral locations with strong legal protections. If you want to be able to send large amounts of money anywhere in the world quickly and legitimately, without tripping a million anti-laundering provisions, this is almost your only choice.
There are very few Americans here because there's practically no corporate veil - a Cayman company is far more transparent than a Delaware company. This is a terrible place to hide funds.
There are more Canadians here because Canada doesn't tax overseas income for non-residents, but Canadian-resident individuals don't get much out of a Cayman shelter. There's a bit of a "loophole" if you own a property here through a shell company, in that you can rent that property and keep the funds here tax-free. But that only works if the rental is generating and using the majority of the funds, and it's totally transparent if CRA comes knocking, so it's pretty limited in utility.
It used to be a bigger thing in the 80s/90s, before the world started cracking down on "tax havens", but the biggest change has been in enforcement. I wouldn't be surprised if some "old money" on the island for decades is grandfathered in to better tax treatment, I've heard as much, but that's a CRA thing and not a Cayman thing. In general, Cayman has never been a place to "hide" funds, it's been a place to legitimately put funds if your country of tax residency privileges that. Tax loopholes aren't on the Cayman side, they're on the US/Canadian/UK side. Don't drag us into that mess.
Also Cayman rum beats Jamaican any day of the week. That's going too far.
I suggest a Caribbean tasting tour.
The major styles of rum are more or less history lessons in which European power colonized the country—England, France, or Spain. Former English and Spanish colonies produce rhum traditionnel, former French colonies produce rhum agricole.
Go to a liquor store in the US and you’ll see rums categorized as “light” and “dark” which is useless, because you are more interested in flavor than appearance. I think this has something to do with the kind of loose regulations defining rum in the US, compared to the much stricter definitions for different types of whiskey. (IMO the US legal definitions of whiskey are too strict, and the definitions of rum are too loose.)
1. What's the tech sector there like? For a software developer who doesn't mind working for the Financial Sector.
2. How expensive life, generally, is in the Cayman?
3. What about opportunities to start your own thing/company to service the financial industry there. How competitive is it? How easy to get your foot in the door?
Many reputable crypto projects I know are set up as Cayman Foundations. For the same reasons: great regulatory clarity and execution.
It's the tax neutrality that matters. Once an investor takes money back to their own country, they are responsible for the taxes themselves. Rather than a system where for instance you might pay the country of residence and every investor from around the world needs to fill in forms to get their difference back.
Some jurisdictions for fund tax residence/incorporation are much much better for this than others. If you then also look at jurisdictions which have a predictable and fair legal system and an efficient admin setup for funds you end up with quite a short list of places (Cayman, Luxembourg, Ireland, etc).
I realize stable and consistent laws and governace fly in the face of some beliefs, but most criticisms of offshore centres reduces to people seeing a truck full of goods and thinking they can seize and resell the wheels so that others, too, can have wheels. If we didn't have the Caymans, we would need somewhere else. The benefit of the Caymans is they are sparsely populated and literally have one job, whereas if you had custodianship anywhere else, you would be putting the futures of entire nations at risk based on the politics of a banana republic.
From a technology perspective, they are like a secret store for authentication tokens. Sure, invent something better, but up-ending the current one without a plan is going wreck literally everything.
I can see the argument that someone from, say, Argentina would benefit from the improved stability, but someone from a Western country is decreasing that country's stability by benefiting from it but refusing to pay for it. I would entirely support the EU making it illegal for EU nationals to do business with Cayman in the same way the US makes it illegal to do business with Cuba.
because Cuba is a tax heaven ?
It requires complete nationalistic hubris to dismiss that.
Its not just a tax blocker. That’s just happenstance because some countries know how to balance their budget. I could think of two dozen other things that Caymans does better than large nations like the US or other financial haven microstates, for business incorporation, capital formation, audits and more.
The regulators in Caymans are very meticulous, many are educated in the US at top universities or had careers in the US.
By all means - proceed…
Its mostly about the master feeder structure, other times about a sandwich, learn about those
You have a feeder for domestic tax persons, and a feeder for non-domestic tax persons and domestic tax exempt persons
Its usually dumb and pointless to have non-domestic tax persons to use your domestic feeder, because the regulations are poorly thought out and counterproductive and actually serve no purpose.
all feeders are partnerships or limited by shares, and send capital to the master entity which does the trading
the difficulty is that comparison is not just about the US or insulting any one country, many old world countries have withholding done on investment-in which even US people would find absurd. or the accredited investor requirements are much lower.
The attentiveness and accessibility of the regulators is a boon.
Dunno where to start but I hope that inspired on the depth of how deep to look. Its a great financial center.
It practically requires people to play devil’s advocate to anything I observe about the cayman islands
But the article also contributed to that, it acts like its a big mystery when the reality is that academic research groups could just never get enough money to dry run forming a hedge fund in the cayman islands and say “oooh I get it”
now they finally did some research and realize this is the worst kept secret, everyone is using the Cayman Islands already for a multitude of reasons that have nothing to do with hiding anything from tax revenues
The point is that the Caymans are neutral territory for tax purposes. If you're in the US, you owe US taxes on the profits in your Cayman fund. Likewise, if you're in Canada, you owe Canadian taxes on the profits on your Cayman funds. This is better than setting your investment vehicle up in Delaware, because if you do that, your Canadian investor will have to pay US taxes (that they don't owe) and then spend months trying to get the money back.
The on-shore US regulations are crazy enough that US based institutional investors (like pension funds) will get nervous at the lack of professionalism if you aren't using a Cayman vehicle.
I can understand their financial regulations make more sense.
But, they aren't contributing to the roads that US hedge fund operators drive on, right? Or, the airports out of which they fly?
If I go further with your statement that their financial regulations make sense, should I interpret that as "US does taxation wrong" (or, it is incompetent with second order effects, etc)?
But, even if the US taxation is wrong or not optimal, how do things like roads and airports get funded in the country in which the person resides?
Is this completely wrongheaded? I don't understand how a citizen of one state can opt out of the taxation structure while still reaping the benefits of living there?
Is this perspective incorrect?
Where it gets more crazy is if the hedge fund manager is a US citizen but hasn’t lived in the US for decades. The USG still requires he pays taxes, even though he isn’t using any services. That’s because taxes aren’t a free agreement to purchase services but are rather an exercise of force.
That and paying for the right to 86 it back to the USA when things get too hot elsewhere.
Think of it as an out of the money put option. It’s massively overpriced until it’s not.
The roads and airports that were going to get funded still get funded. No amount of taxation is going to fix the neglected area with poor people, its not going to happen. The taxes will continue to pay interest in debt that governments issue, excessive amounts of capital that… will never go to the neglected side of town ever.
Your civic duty is reporting tax events, paying what is legally owed. Nobody knows what “fair share” is.
And then… its not even about tax. Its about regulatory burden. Bureaucratic requirements to accomplish anything. Caymans has a fairly seamless and modern processes, intelligent and competent staff. Most jurisdictions do not. Its easy to think “there must be a reason for the bureaucratic requirements… in my country”, which country? USA? Netherlands? China? Surely one is less true than the other, the point here is to spark introspection.
Cayman services all, it doesn't have the geopolitical baggage while adhering to broad sanctions lists.
> On two major fronts, limited insurance for bank deposits and terminally impaired capital structures for European banks, the Fed just positioned the US to be the recipient of major capital inflows as all of the interest rate and credit risk is transferred back to Europe.
This seems wrong to me based on my understanding but i'd be willing to be educated.
Based on the fact that everyone got their money back from FDIC in what way have these bank failures caused "Cayman sandwich are getting broken by bank failures like svb"
The Cayman's had one purpose for most hedge funds. Move assets off shore so all gains would be tax free. Once you want your money you onshore it again in and pay tax on that total. This allows your money to grow tax free, which means if you're good at it, it grows faster.
It's just like a tax free retirement account that lets you deduct your contributes but makes you pay tax on the money you withdraw.
As far as for companies using the cayman sandwich, what i've read says everyone got their assets out, no?
Did they?
(Edit to add: If you meant the letter in that link what it says doesn't sound like "you will definitely get your money back, you just need to file a claim first" at all:
"Balances held by customers in accounts at the Cayman Islands Branch at failure are not deposits under the Federal Deposit Insurance Act [...] Your status as a result of the Institution's failure is that of general unsecured creditor.")
The first clue about contemporary political economy could tell us that the entire SVB meltdown would be socialized by the US state. See my comments in this thread for my predictions pre-bailout: https://news.ycombinator.com/item?id=35094447
"By law, after insured depositors are paid, uninsured depositors are paid next, followed by general creditors and then stockholders. In most cases, general creditors and stockholders realize little or no recovery. Payments of uninsured funds only, called dividends, depend on the net recovered proceeds from the liquidation of the bank's assets and the payment of bank liabilities according to federal statute. While fully insured deposits are paid promptly after the failure of the bank, the disbursements of uninsured funds may take place over several years based on the timing in the liquidation of the failed bank assets. "
The acceptance of the claims means that they will share the proceeds from the liquidation of the assets of the non-acquired remains of the bank with the other general unsecured creditors.
As far as I can see, those Cayman Islands "not-deposits" will be paid just like the outstanding invoices owed to furniture distributors, etc. They'll get at least part of it but there is no guarantee about how much - and it will take time. [Of course they could (?) still decide to treat them differently. But the current outlook is not bright.]