Cayman IslandsTax Obligations Detailed

As of today, February 5, 2025, the Cayman Islands presents a unique tax environment with no direct taxes on individuals or corporations.

Employer Obligations in the Cayman Islands

The Cayman Islands' tax system is characterized by the absence of direct taxes, meaning no income tax, corporate tax, capital gains tax, property tax, or payroll tax. This applies to both residents and non-residents. However, employers do have certain financial and compliance obligations:

Payroll Contributions

• Pension: Employers contribute 5% of each employee's salary up to a maximum annual earnings cap of KYD 87,000.
• Health Insurance: Employers typically share health insurance costs equally with employees. Additional costs for dependents or upgraded plans are borne by the employee.

Compliance and Reporting

• Employment Contracts: Employers must ensure employment contracts comply with Cayman Islands labor laws.
• Payroll Processing: Employers are responsible for calculating and distributing employee salaries, deducting pension and health insurance contributions.
• Work Permits: Employers must manage work permit applications and renewals for non-Caymanian employees.

Employee-Related Costs

Although there are no direct taxes, employers should factor in the following costs:

• Pension Contributions: The 5% mandatory pension contribution.
• Health Insurance Costs: The agreed-upon share of employee health insurance premiums.
• Vacation Leave: Employees are entitled to a minimum of 14 working days of paid annual leave, increasing to 21 days after ten years of continuous service.
• Maternity/Paternity Leave: Employers must comply with maternity and paternity leave regulations, including paid time off as stipulated by law.
• Severance Pay: Employers must adhere to severance pay requirements as outlined in the Labour Act.

Absence of Other Taxes

It is important to note that there are no other taxes relevant to employment in the Cayman Islands, such as:

• Income Tax: No taxes are levied on personal income.
• Payroll Tax: There is no separate payroll tax imposed on employers.
• Value-Added Tax (VAT): The Cayman Islands does not have a VAT system.

It's important to remember that while this information is current as of February 5, 2025, tax laws and regulations can change. Consulting with a local tax advisor is always recommended for the most up-to-date information.

In the Cayman Islands, there are no direct taxes on individuals, meaning no income tax, capital gains tax, inheritance tax, or property tax. However, there are mandatory contributions for both employees and employers towards pension and health insurance.

Deductions from Salary

• Pension Contributions: Employees contribute 5% of their salary up to a ceiling of KYD 87,000 annually.
• Health Insurance: Costs are generally split equally between the employee and employer. Employees pay additional costs for dependents or upgraded plans.

Employer Contributions

• Pension Contributions: Employers contribute 5% of the employee's salary up to the annual ceiling of KYD 87,000.
• Health Insurance: Employers cover half of the basic health insurance plan costs.

Other Considerations

• As of today, February 5, 2025, this information is current, but tax laws are subject to change. It is important to stay informed about any updates or amendments to Cayman Islands tax regulations.
• It's important to note that while there are no direct taxes on individuals in the Cayman Islands, US citizens and residents may still have tax obligations in the US, including reporting worldwide income to the IRS. This is also true for residents of other countries with similar tax laws.
• Businesses operating in the Cayman Islands are subject to certain fees, such as an annual renewal fee to maintain legal status. This fee is mandatory and while not technically a tax, it is a cost of doing business in the Islands.

The Cayman Islands does not have a Value Added Tax (VAT) or Goods and Services Tax (GST) system. Government revenue is generated primarily through import duties, work permit fees, tourism fees, and company registration fees.

Import Duties

• Generally levied at rates between 22% and 27% on most imported goods. Certain luxury items may be exempt. More specific details can be found on the Cayman Islands Customs website.

Work Permit Fees

• Fees are charged to employers for each foreign worker they employ. These fees contribute significantly to government revenue.

Tourism Fees

• Fees are collected from cruise ship passengers and hotel stays.

Company Registration Fees

• Companies registered in the Cayman Islands pay various fees, including annual registration fees.

No VAT/GST

• The Cayman Islands' tax system does not include any form of VAT or GST. Businesses do not need to register for, collect, or remit VAT/GST. This means no VAT/GST applies to goods or services sold within the Cayman Islands.
• There are no thresholds for registration, filing requirements, deadlines, or exempt goods and services related to VAT/GST, as this tax does not exist in the Cayman Islands.

Other Taxes

While there is no VAT/GST, other relevant taxes and duties for businesses include import duties (generally 22% to 27%), stamp duties on property transfers (generally 7.5%), and stamp duty on certain legal documents. There are no property taxes, corporate income taxes, capital gains taxes, wealth taxes, or inheritance taxes. Further information on specific rates and regulations can be found on the Cayman Islands Customs and Border Control website.

The Cayman Islands offer a tax-neutral environment, particularly appealing to businesses.

Tax Advantages for Businesses

• No Direct Taxes: The Cayman Islands levy no corporate tax, income tax, capital gains tax, withholding tax, or property tax. Revenue is generated through indirect means like import duties, tourism fees, and work permit fees.
• Special Economic Zones: Cayman Enterprise City is a special economic zone offering additional benefits, including 100% foreign ownership and exemptions from various taxes. Businesses established within this zone operate in a tax-free environment.

Incentives for Micro and Small Businesses (2024-2025)

• Trade and Business Licensing Fee Reductions: Significant reductions in trade and business licensing fees are available for micro and small businesses.

  • Micro-Businesses: 100% reduction in licensing fees. Eligibility requires, among other conditions, a maximum of four employees (excluding the owner) and annual gross revenue not exceeding CI$250,000 in the preceding fiscal year.
  • Small Businesses:
    • 50% reduction in West Bay and George Town.
    • 75% reduction in Bodden Town, North Side, and East End.
    • 75% total reduction in Cayman Brac and Little Cayman (includes a pre-existing 50% reduction). Eligibility requires, among other conditions, a maximum of 12 employees (excluding the owner) and annual gross revenue not exceeding CI$750,000 in the preceding fiscal year.

• Other Incentives (Sister Islands): Cayman Brac and Little Cayman offer additional incentives like work permit fee reductions, duty concessions on building materials, stamp duty concessions on land transfers, and specific license concessions.

General Information

While no direct tax incentives exist due to the tax-neutral system, the absence of taxation itself serves as a significant incentive. Businesses operating within the Cayman Islands benefit from increased profitability and can reinvest earnings without tax burdens. The jurisdiction also offers financial confidentiality and a streamlined company registration process. It's important to note that while the information above is current as of today, February 5, 2025, regulations and incentives can change. Always consult with relevant authorities or legal professionals for the most up-to-date information.