Much has been written about the Cayman Islands being tax-free and whilst this is not exactly true there are definitely benefits to be had for people moving to Cayman in the areas of investments, property and duty-free shopping. The reality from an individual’s perspective is that, apart from your payment contributions to compulsory medical insurance and your pension, there will be no deductions from your salary and no Cayman taxes on profits and gains from investments. Moreover there are no sales, goods and services taxes or VAT and many luxury goods in Cayman are either virtually or completely duty-free. (See the information on Duty-Free Advantages later in this chapter). Also if you decide to live out the rest of your days in Cayman, there are no inheritance taxes or death duties.

 The Cayman government raises the money needed to run and improve the infrastructure of the Islands from customs duties, fees for local work-permits and licences, tourist accommodation tax and fees raised from the financial services industry and tourism. Typically import duty is 20% on any item imported into the Cayman Islands, although some goods like vehicles, wines, spirits and some food items are charged at varying rates.

 If new residents import their used household and personal belongings (which they have owned for more than six months) within six months of their arrival, then they will not be charged import duty. After this time normal tariffs will apply. (See the Preparing to Move chapter for more information.)

 In addition, each individual resident has a Customs allowance of CI$350 for personal goods each time they enter Cayman.

 Visit www.caymanislandscustoms.com for more information on new resident import allowances, customs allowances and import duties.

Saving and Investing in Cayman

Working in Cayman is about the slower pace of life and being able to enjoy the year-long tropical climate, white sand beaches and warm, crystal-clear seas. Some might say that working in Cayman is also particularly rewarding as your earnings and any savings or investments are tax-free so you don’t have to give a large portion to the taxman!

 That said, the cost of importing pretty much everything and the added import duty make the cost of living significantly higher than in mainland countries, but at least in Cayman you have a choice about how much you spend beyond the basic necessities.

 Often it takes people a while to make the most of tax-free investment opportunities in Cayman. Most people know that there are tax advantages to be had, but are less certain as to how to go about maximising these opportunities and how to get started with the whole process.

 So before you set sail to your island in paradise, you may well wish to consider the following:

Seek tax advice in your country of residence. The tax authorities in Canada, the UK and the US treat income differently when you leave home. You should find out if it makes sense to transfer savings and investments to Cayman or just keep them at home. Also you will need to find out how long you need to be a non-resident before you secure your tax-free benefits, if at all. Tax legislation is continually changing so you need to ensure you have the latest information before you make decisions on investing. For example, at the time of going to press, in the UK you have to be a non-resident for two full tax years in order to avoid tax on your income. If you return to the UK before two years are up, you will have to pay tax on income received in the meantime. If you are a US citizen you are liable to be taxed on your worldwide income irrespective of where you physically earn your income though you may be eligible for a tax allowance on the first US$82,400 of earned income. Canadian citizens have to prove that they have severed ties with Canada to avoid paying tax.

When you arrive in Cayman one of the first items on the agenda is to open a bank account. This will enable you to get a cheque book, a debit card and to use ATMs. Several banks in Cayman offer on-line and direct-debit banking services, but at present it is limited to only a few service providers. (Note that banks in Cayman are strictly regulated by the Government-run Cayman Islands’ Monetary Authority, but there is no equivalent in Cayman to Federal Deposit Insurance.)

The next step is to go beyond the usual retail banking services and to get an investment account. You will then be able to take advantages of some of the other services that banks offer such as getting investment advice, using brokerage services or for those with greater assets, using discretionary investment management services. Most of the retail banks in Cayman have a full range of financial services and there are a number of financial institutions which specialise in advising individuals who are looking for private banking or wealth management facilities.

At the simplest level, if you are looking to earn a little more from your savings you might consider moving funds from your deposit account back home to a Cayman based account which is not taxed at source. At the time of going to press US$ fixed deposits in Cayman are paying between 4.25% and 4.85%. These rates are based on money market funds with daily liquidity and with no direct link to the stock market. Other fixed term deposits are available and rates will vary depending on the size of the deposit. Interest payments are of course paid with no tax deducted. Just to emphasise the benefit of investing tax free, if you invested US$100,000 over seven years at 4.25% you would receive US$133,824 but if there was 30% withholding tax deducted it would only amount to US$122,778. You are likely to obtain even better rates by speaking with a broker from one of the banks on the Island.

Most banks in Cayman have an Investment/brokerage company on the Island that has full access to all the major world markets. In addition they will have Mutual Funds both propriety and third party that you can take advantage of. It is easy to just put your money in a savings account earning from 1% to 4%, but with a little effort you can learn other ways of making your money work for you.

In anticipation of you establishing your bank account or investment account, you will save yourself a significant amount of time if you come prepared. With the current environment of due diligence there are a number of documents required to establish an account in Cayman. The requirements may vary with each institution but generally you will require the following:

● A notarised photo page copy of your passport

● A second picture ID verification duly notarised

● Confirmation of your residential address. This could be difficult as you will most likely not know where you will be living and therefore this is likely to be waived.

● A banking reference from an existing bank where you have been a customer for more than three years.

● A professional reference from an accountant or lawyer who has known you for more than three years. (References should be addressed to the bank with which you will be opening an account and therefore you may want to consider which bank this will be before you arrive in Cayman. Banks and financial institutions in Cayman do not generally take a reference addressed “To whom it may concern”).

Be prepared to provide evidence of the source of your funds and, whatever you do, don’t bring large amounts of cash or traveller’s cheques. Cayman banks are extremely vigilant about money-laundering and would rather not have your business than take the slightest risk.

Think about your future needs. If you plan to return to a country that is not US dollar denominated, consider converting your CI$ or US$ earnings on a regular basis. If you save during your stay but only convert your savings when you return home you may be lucky, but more often than not you will find that the exchange rate has worked against you. As we have seen in the last year or so, those who have saved in US$ and convert now are losing out. Converting funds on a regular basis will average out what you receive. Again a broker or financial adviser will be able to assist in this regard.

Higher returns are potentially available for people who are prepared to accept a little more risk and of course the higher the return achieved the greater the tax benefits. We have already mentioned the benefits of a money market account or fixed deposit account, but you might also consider investing in a conservatively managed portfolio where you could be looking at returns of 7.5% per annum. As an example, if you invested US$100,000 over seven years at an average return of 7.5% you could expect to earn US$165,905, which compares favourably to 4.5% deposit account which would grow to around US$133,000. It is all a question of risk verses reward. For those who are prepared to accept higher risks, double digit returns can be achieved with the corresponding level of tax benefits.

 When you decide it is time to go home you don’t necessarily have to liquidate everything and take the money back with you. Whilst you are in Cayman, you may want to consider setting up a Cayman Company or a Trust to own your investments and these can also provide tax advantages when you return home. The retail bank you choose will have a trust department that can advise you on what may be best for you. As with your arrival, when you are planning your return home, it is essential to obtain competent tax advice on what to do with your investments, as well as the optimum timing of your return within a tax year.

Do not forget to have fun! Yes it is wise to save and invest but do not lose out on all the opportunities for fine dining and travel opportunities. This may be an island paradise but the work can be intense and relaxation, with so many options available, should not be overlooked.

As well as saving in investment products, do not overlook the opportunity to buy property on the Island. If you consider how much rent you will pay over five years, it is likely that your monthly outgoings if you purchase a property will be similar, and of course you also have the potential capital growth on your property during the time of ownership. Even if you leave the Island you may well find you can rent the property and keep the investment for future growth. Cayman banks are eager to grant mortgages to suitably qualified applicants. The section on Finding a Home will give you more information.

 So in conclusion it would be unwise not to take advantage of the investment opportunities that exist in Cayman, but you should strike a healthy balance between saving and enjoyment. There are lots of ways of spending money in this part of the world. It’s fun to go to Disney World in Orlando with the family, or spend the weekend in Miami, Jamaica, Cuba or New York as these are just a flight away and you should do this, so that when you leave it is not just money, but also memories you have saved.

 There are a number of institutions you can speak with in Cayman regarding investment opportunities whilst working on the Island. The major banks, Cayman National Bank, Butterfield Bank and Royal Bank of Canada all have retail banking and Investment management departments that cover all the major world markets.

Butterfield Bank (Cayman) Limited

Email: investments@butterfieldbank.ky

Tel: (345) 815 7604 (Investment advice and brokerage services)

Cayman National Securities Ltd.

Email: info@cnifs.com

Tel: (345) 949 7722 (Investment advice, brokerage services, foreign exchange trading, mutual funds, discretionary investment management)

RBC Global Private Banking

Email: gpbcayman@rbc.com

Tel: (345) 814 8145 (Investment advice and securities brokerage)

Tel: (345) 914 4652 (Private banking, trust services and discretionary investment management)

Duty-Free Advantages

Another way to benefit from Cayman’s tax system is in the area of duty-free shopping. Much of the shopping in the Cayman Islands is duty-free as well as being tax-free, so it might make sense for you to delay the purchase of certain luxury items like jewellery, watches, leather goods and cameras until you arrive in Cayman. (Note that in this context ‘duty-free’ means that the Government has not added any import or Customs duty to items when they are imported into Cayman, and ‘tax-free’ refers to the absence of any form of sales tax in the Islands). With no mark-up on duty, the retail price, even without sales tax, GST or VAT can be considerably less than in mainland countries.

 When you buy products in a duty-free, tax-free market, there can also be pricing benefits that come directly from the manufacturers of goods. Many luxury goods manufacturers fix the retail prices of their products and dictate that retailers do not sell for less than the prescribed price. These are typically set according to country or geographic area; however in duty-free markets, manufacturers will generally allow retailers to give better pricing than customers might expect in their home market. As with everything, it pays to shop around (particularly on Saturdays when there are usually no cruise ships in port), but buying duty-free items in the Cayman Islands can offer significant savings of anywhere from 5% to 50% or more compared with prices at home.

 The best way to take advantage of these opportunities is while they are available to you. A little planning can go a long way in maximizing savings. If you are at a point in your life where you are about to make a large purchase such as an engagement ring, loose diamonds, a wristwatch, a handbag or other luxury goods, consider waiting to make your purchase when you arrive in Cayman.Not many people know that there is a large selection of diamonds in Cayman and again with a little research you might surprise yourself as to the savings you can make.

 Alternatively you might be looking to buy an every day item such as a digital camera or a pair of sunglasses. Other duty-free favourites, which you or your friends and family can take home are alcohol, cigarettes, cigars, fragrances and cosmetics. Having said all of this you need to be aware of the customs regulations of your home country.

 Whilst on the topic of sunglasses, if you do not have a suitable pair, then Grand Cayman is a great place to go shopping for them. A good pair of sunglasses is really important in the Caribbean sunshine as the intensity of ultra-violet rays is typically three times greater than non-tropical countries and you are likely to spend much more time outside when compared to your home country.

 Although you don’t have to spend large sums of money to buy a good pair of sunglasses, keep in mind that a moderate or higher price range will generally yield a higher quality, more durable pair of sunglasses. You will be able to choose from a huge selection of styles and many of the most sought-after brands like Maui Jim, Oakley, Ray-Ban, Prada, Gucci and Chanel, to mention a few, are available from the shops in downtown George Town.

 If you are in the market for diamonds then, according to Diamonds Direct, you can expect saving of up to 50% compared to American retail prices. Cayman has a great range from 0.25 carat to well over 10 carats and a wide selection of styles and settings are available in all the popular diamond shapes from round brilliant to trillion to princess cuts.

   If you are looking to buy a camera then they too are duty-free and if you shop around they will often be less expensive than from your home country. Camera stores stock the well known brands such as Nikon, Canon, Vivitar, Olympus, Sanyo, Sony and Pentax and in addition to digital SLR cameras and accessories you can also find camcorders and specialist shops selling a large array of underwater photographic equipment.

Two stores to check out are:

Cathy Church’s Photo Centre & Gallery

Tel: (345) 949 7415

Cayman Camera

Tel: (345) 949 8359

www.caymancamera.com

Go back to Why Cayman is a Global Financial Centre?

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