Economic Overview
In view of heightened socio-economic and political uncertainties in 2016, global economic activity during the year experienced a decline in the overall growth rate, from 3.4% in 2015 to 3.1%. As reported by the International Monetary Fund, most major economies recorded a deceleration in growth, except Canada.
The advanced economies grew by 1.7%, compared to 2.1% in 2015. The US posted a lackluster growth of 1.6% relative to the 2.6% achieved in 2015, as weakness in non-residential investment weighed on growth. The Caribbean region had an estimated economic growth of 3.4% in 2016, a deceleration compared to the 4.0% of the previous year.
Against this global backdrop, the Cayman Islands marked another year of economic resilience in 2016. Gross Domestic Product (GDP) is estimated to have improved by 2.7% during the year, albeit it represents a slight moderation from the 2.8% growth in 2015.
In 2017, global economic activity is expected to recover modestly with 3.5% growth forecast in 2017, and 3.6% in 2018. Advanced economies are anticipated to improve by 2.0% in both years. The US is expected to have a sharp rebound of 2.1% in 2017, although this is expected to level off in 2018 given the lack of a fiscal expansion policy.
For the Cayman Islands, growth in the first quarter of 2017 was estimated at 2.0%, consistent with the overall forecast for the year of 2.1%. The slower forecast growth relative to 2016 is associated with the expected softening of growth in capital investments compared to the peak- level construction activities which started in 2015.
Key Sectors
The Islands’ economic growth in 2017 was broad-based as all sectors expanded. The hotels and restaurants sector had the highest estimated growth of 8.5 percent due to increases in air and cruise passenger arrivals. The other top four industries with the highest estimated growth rates were construction (7.2%); mining and quarrying (5.9%); producers of government services (3.7%); and real estate, renting and business activities mainly legal and accounting services (2.9%)
The central government recorded its highest overall fiscal surplus on record of $140.6 million, as an increase in total revenue (by 6.7%) outweighed the increase in total expenditure (by 0.8%).
The strong fiscal position allowed the government to reduce its outstanding debt from $483.9 million as at end 2016 to $449.1 million as at end 2017.
Taxes in Cayman Islands
Investment basics:
- Currency – Cayman Islands Dollar (KYD)
- Foreign exchange control – No
- Accounting principles/financial statements – GAAP/IFRS
- Principal business entities – These are the exempted company, nonresident company and local company.
Corporate taxation:
- Residence – No
Basis – No
Taxable income – No - Taxation of dividends – No
- Capital gains – No
- Losses – No
- Rate – No
- Surtax – No
- Alternative minimum tax – No
- Foreign tax credit – No
- Participation exemption – No
- Holding company regime – No
- Incentives – No
Withholding tax:
- Dividends – No
- Interest – No
- Royalties – No
- Technical service fees – No
- Branch remittance tax – No
Other taxes on corporations:
- Capital duty – No Payroll tax – No
- Real property tax – No Social security – No
- Stamp duty – Stamp duty is imposed on the transfer of Cayman Islands real estate. The duty is applied on the greater of the purchase price or the fair market value of the land and building at the time of the transfer, at a rate of 7.5% for most property. Stamp duty also applies to a “land holding company,” as defined.
- Transfer tax – No
- Other – Duty, charged at varying rates depending on the goods, is levied on most goods imported into the islands. There also is a tonnage fee for vessels.
Investing in Cayman Islands
- Standard of Living: The Cayman Islands has the highest standards of living in the Caribbean. This means that a large percentage of residents are comfortable and would be able to buy any goods or services you offer. If you set up your business in a place with low standard of living, you would likely make less profit compared to setting it up in a place where the standard of living is good.
- The Cayman Islands ranks 8th on the list of countries with the highest GDP Per capita in the world.
- No Taxes: This is definitely attractive to every investor; a situation where at the end of the year, all your profit is yours. This is exactly what happens in the Cayman Islands. No income taxes or Capital gains taxes are charged on your business.
- Government Stability: Another good reason why the Cayman Islands is a very attractive place for investors is that the government is stable, so there are no fears of the effect of political instability on business owners.
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Good Infrastructure: You would also find sophisticated infrastructure in the Cayman Islands that would help with smoother running of your business.
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Strong Economy: Another benefit of doing business in the Cayman Islands is that they have a very strong economy due to the international banking operations there.
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Business Privacy: Since you won’t pay taxes, you are not under any obligation to expose your business records to any government agency whatsoever. You are able to maintain your business privacy as you would like.