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Recent developments

Have there been any notable recent developments in the provision of private client and offshore services in your jurisdiction, including any regulatory changes or case law?

The Trusts Law (2018 revision) is the most notable recent development in the provision of private client and offshore services in the Cayman Islands.

Individual taxation

Residence and domicile

How is residence/domicile determined for tax liability purposes in your jurisdiction?

There is no direct taxation in the Cayman Islands; there is only stamp duty and import tax, which apply to both residents and domiciliaries in the same manner.

Income

Describe the income tax regime in your jurisdiction (including tax base, rates, filing formalities and any exemptions, reliefs or deductions).

There is no income tax in the Cayman Islands.

Capital gains

Describe the capital gains tax regime in your jurisdiction (including tax base, rates, filing formalities and any exemptions, reliefs or deductions).

There is no capital gains tax in the Cayman Islands.

Inheritance and lifetime gifts

Describe the inheritance and gift tax regime in your jurisdiction (including tax base, rates, filing formalities and any exemptions, reliefs or deductions).

There is no inheritance tax or gift tax in the Cayman Islands.

Real estate

What taxes apply to individuals’ acquisition and disposal of real estate in your jurisdiction?

The stamp duty rate on all three Cayman Islands is 7.5% of the purchase price or market value of the property, whichever is higher. Stamp duty is calculated in Cayman Islands currency.

For gifts of real estate, stamp duty will be CI$50 when the transfer is stated to be for natural love and affection between parent and child, husband and wife, brothers and sisters, grandparents and grandchildren. In all other cases, the full rates of duty apply. There is also a CI$100 stamp duty on purchase agreements. 

For leasehold agreements, stamp duty varies as follows:

  • for lease terms of fewer than five years – 5% of the average annual rent;
  • for lease terms between five and 10 years – 10% of the average annual rent;
  • for lease terms between 10 and 30 years – 20% of the average annual rent; and
  • for lease terms of 30 years or more – treated the same as a transfer.

Non-real estate assets

Do any taxes apply to the acquisition and disposal of other assets apart from real estate?

There is no direct tax in the Cayman Islands; there is only stamp duty and import tax.

Other applicable tax regimes

Are any other direct or indirect tax regimes relevant to individuals?

There is no direct taxation in the Cayman Islands; there is only stamp duty and import tax.

Planning considerations

Are there any special tax planning considerations for individuals with a link to your jurisdiction?

There is no direct taxation in the Cayman Islands; there is only stamp duty and import tax.

Trusts, foundations and charities

Trusts

Are trusts legally recognised in your jurisdiction? If so, what types are available and most commonly used?

The Cayman Islands is one of the leading jurisdictions for the establishment and management of trusts. The most common types of trust are:

  • discretionary trusts;
  • strict settlements;
  • charitable trusts; and
  • reserved powers trusts, where powers are reserved to the settlor or conferred on the protector or other person.

The Cayman Islands also provides for ‘STAR trusts’ (based on the Special Trusts (Alternative Regime) Law 1997), which are a type of statutory trust that may be used for mixed purposes, charitable and non-charitable. The statute allows the settlor to repose in an enforcer certain duties and powers that at common law are exercised by trustees. Another feature of a STAR trust is that it restricts the right to information which beneficiaries of a non-STAR trust would otherwise be able to access.

Private trust companies (PTCs) are increasingly being used by high-net-worth private clients as part of their succession planning and wealth structuring. A PTC can be formed to act as trustee of one or more family trusts. The board of directors of the PTC may be composed of family members, professional independent advisers or a combination thereof.  By way of a PTC, the settlor may retain as much or as little control and involvement without prejudicing the legal validity of the trust structure.

What rules and procedures govern the establishment and maintenance of trusts?

Trusts can be established:

  • at common law by a unilateral declaration of trust by the trustee;
  • by a deed of settlement between a settlor and trustee; and
  • pursuant to the requirements of statutory trusts, as set out in the Trusts Law.

Trusts are subject to English common law (except where statutory provisions override common law rules) and the decisions of the Cayman Islands courts. Also relevant are the Fraudulent Dispositions Law (1996 revision) and the Perpetuities Law (1999 revision).

How are trusts taxed in your jurisdiction?

There is no direct taxation in the Cayman Islands. A trust deed will attract a nominal stamp duty of CI$40 (approximately US$50).

Foundations and charities

Are foundations and charities legally recognised in your jurisdiction? If so, what forms can they take?

Yes, both foundations and charities are legally recognised in the Cayman Islands.

Foundation companies may be incorporated in the Cayman Islands pursuant to the Foundations Companies Law 2017. The law is drafted to allow the foundation company to be rooted in Cayman Islands company law, but to function like a civil law foundation.

Charities are registered pursuant to the Non-profit Organisations Law 2017.

What rules and procedures govern the establishment and maintenance of foundations and charities?

Foundation companies that are incorporated in the Cayman Islands are governed by the Foundations Companies Law and the Cayman Islands Companies Law (2018 revision), except to the extent modified by the company’s articles and by-laws.

Charities are governed by the Non-profit Organisations Law and the Companies Law.

How are foundations and charities taxed?

There is no direct taxation in the Cayman Islands.

Compliance issues

Anti-avoidance and anti-abuse provisions

What anti-avoidance and anti-abuse tax provisions apply in the context of private client wealth management?

There is no direct taxation in the Cayman Islands, and consequently no anti-avoidance or anti-abuse provisions.

Anti-money laundering provisions

What anti-money laundering provisions apply in the context of private client wealth management (eg, beneficial ownership registers)?

Cayman Islands companies and limited liability companies are required to establish and maintain a register of beneficial ownership, with certain exceptions. The relevant laws are:

  • the Companies Law;
  • the Beneficial Ownership (Companies) Regulations 2017 and 2018; and
  • the Beneficial Ownership (Limited Liability Companies) Regulations 2017 and 2018.

Cayman Islands trusts are not legal persons and are not in scope to the legislation; they are therefore not required to maintain a register of beneficial ownership.

The Cayman Islands has a Proceeds of Crime Law, as well as related Anti-money Laundering Regulations and Guidance Notes. The Cayman Islands has implemented the Financial Action Task Force’s 40 Recommendations on the Prevention of Money Laundering and the Countering of Terrorist Financing, which are the international standards for effective anti-money laundering and counter terrorist financing regimes. The Cayman Islands is a member of the Caribbean Financial Action Task Force (CFATF) and observe the CFATF’s 1992 Kingston Declaration on money laundering.

Wills and probate

Succession rules

What rules and restrictions (if any) govern the disposition of and succession to an individual’s property and assets in your jurisdiction?

The Cayman Islands follows common law concepts of freedom of testamentary disposition. There are no forced heirship rules under Cayman Islands law. English common law rules on conflicts of law apply, meaning that the law of the jurisdiction of immovable property will apply to the disposition of such property, and the law of the decedent’s last domicile will apply to movable property. Consequently, the validity of the decedent’s will is determined by the law of the decedent’s last domicile, with domicile being determined according to English law.

Intestacy

What rules and procedures govern intestacy?

The decedent’s personal representative is responsible for ensuring the decedent’s estate is dealt with in accordance with the law. The personal representative must apply to the Cayman Islands Court for a grant of letters of administration. The Succession Law (2006 revision) provides for how chattels and residuary estate are distributed to the surviving spouse, children and other close relatives. If there is no spouse or children, the residuary of the estate will be distributed in the manner prescribed in the Succession Law, and in the case of default of any person taking an absolute interest, the residuary estate of the intestate shall belong to the Crown as bona vacantia.

Governing law

What rules and restrictions (if any) apply to the governing law of a will?

The validity of the decedent’s will is determined by the law of the decedent’s domicile. The decedent’s domicile is determined according to English law. Legitimate children take the domicile of their father, whereas illegitimate children take the domicile of their mother. Domicile is changed by moving to a new place with the unequivocal intention to reside permanently and indefinitely in that new place.

Formalities

What are the formal and procedural requirements to make a will? Are wills and other estate documents publicly available?

A testator must have testamentary capacity, meaning the testator has attained the age of majority and understands the nature of making the testamentary disposition. For requisite mental capacity, the Cayman Islands follow the well-established principle from the English Court of Appeal in Banks v Goodfellow (1870, LR 5 QB 549):

It is essential… that a testator shall understand the nature of his act and its effects; shall understand the extent of the property of which he is disposing; shall be able to comprehend and appreciate that claims to which he might give effect.

The testator must know and approve of the will’s contents, and not be subject to undue influence or coercion. The will must be signed by the testator in the presence of two witnesses who also sign contemporaneously. When the Cayman Islands Court grants an order for probate or letters of administration, the associated will and order are recorded in the public records of the Probate Court of the Cayman Islands.

Validity and amendment

How can the validity of a will be challenged? Can the will be amended after the decedent’s death?

A will can be challenged on the basis that it was not validly executed in the domicile of the decedent. The decedent’s domicile is determined according to English law. Legitimate children take the domicile of their father, whereas illegitimate children take the domicile of their mother. Domicile is changed by moving to a new place with the unequivocal intention to reside permanently and indefinitely in that new place. For wills entered into under the law of the Cayman Islands, lack of mental capacity, undue influence, duress, forgery or invalid execution, if proved, can invalidate a will. Invalid execution, such as absence of signatures (witness or testator), is easy to prove. However, proving a lack of testamentary capacity can be much more difficult, lengthy and expensive. If a challenge is successful, the will would be declared invalid and any valid prior will would be admitted to probate.  If no valid prior will exists, the rules governing intestacy will apply.

How is the validity of a will established in your jurisdiction?

The validity of the decedent’s will is determined by the law of the decedent’s last domicile. The decedent’s domicile is determined according to English law. Legitimate children take the domicile of their father, whereas illegitimate children take the domicile of their mother. Domicile is changed by moving to a new place with the unequivocal intention to reside permanently and indefinitely in that new place.

To what extent are foreign wills recognised? Do any special rules and procedures apply to establishing their validity in your jurisdiction?

Validly executed foreign wills are recognised in the Cayman Islands. Validity of the decedent’s will is determined by the law of the decedent’s last domicile. English common law rules on conflicts of law apply, meaning that the law of the jurisdiction of immovable property will apply to the disposition of such property, and the law of the decedent’s last domicile will apply to movable property. The decedent’s domicile is determined according to English law.

Estate administration

What rules and procedures govern:

(a) The appointment of estate administrators?

The decedent’s personal representative is responsible for ensuring the decedent’s estate is dealt with in accordance with the decedent’s wishes and the law. The personal representative must apply to the Cayman Islands court for a grant of probate or a grant of letters of administration as appropriate.

(b) Consolidation and administration of the estate?

Following a grant of probate or a grant of letters of administration, the decedent’s personal representative has one year within which to realise and administer the estate and can use the order from the Cayman Court to prove his or her authority to deal with the deceased’s estate. Additionally, the decedent’s personal representative must, within one year after the grant of probate or letters of administration, file accounts with the clerk of the court, showing receipts and distributions of the estate. Such accounts will be open to inspection by any person beneficially interested.

(c) Distribution of the estate to heirs?

The Cayman Islands follows freedom of testamentary disposition. There are no forced heirship rules, elective shares or community property in the Cayman Islands. The Succession Law provides for how the chattels and residuary estate of an intestate are distributed among the surviving spouse and children, or other close relatives if there is no spouse or children.

(d) Settlement of the decedent’s debts and payment of any taxes and fees?

There is no estate tax or inheritance tax in the Cayman Islands. The decedent’s personal representative is responsible for ensuring payment of all established or proven debts due from the estate to private or public creditors.

Planning considerations

Are there any special considerations specific to your jurisdiction that individuals should bear in mind during succession planning?

English common law rules on conflicts of law apply, meaning that the law of the jurisdiction of immovable property will apply to the disposition of such property, and the law of the decedent’s last domicile will apply to movable property. Consequently, the validity of the decedent’s will is determined by the law of the decedent’s last domicile. The decedent’s domicile is determined according to English law. Legitimate children take the domicile of their father, whereas illegitimate children take the domicile of their mother. Domicile is changed by moving to a new place with the unequivocal intention to reside permanently and indefinitely in that new place. There is no forced heirship, elective shares or community property in the Cayman Islands.

Capacity and power of attorney

Loss of capacity

What rules, restrictions and procedures govern the management of an individual’s affairs where he or she loses capacity and the grant of power of attorney in such cases?

An applicant can apply to the Cayman Islands Grand Court to appoint a guardian for a person alleged to be of unsound mind. The court will hear evidence from the applicant, as well as any opposing parties, as to the person’s mental capacity and will require medical evidence in support of the application. The court will also hear evidence regarding the suitability of any proposed guardian.

Minors

What rules, restrictions and procedures govern the holding and management of a minor’s assets until the minor reaches the age of capacity?

A minor cannot hold title to property in the Cayman Islands. The age of legal capacity in the Cayman Islands is 18. A trustee of property in which a minor has an interest may pay property to the minor’s parent or guardian who can give good receipt thereof to the trustee. On the minor reaching the age of legal capacity, the trustee must pay over the property to the individual.

Family links

Marriage and civil partnerships

What matrimonial property regimes are recognised in your jurisdiction?

There is no forced heirship, elective shares or community property in the Cayman Islands.

Are same-sex marriages and/or civil partnerships recognised in your jurisdiction?

Same sex marriages are not recognised in the Cayman Islands; however, in 2016 the Immigration Appeals Tribunal found that the Cayman Islands’ constitution allows for a person to include a spouse as a dependent in a same-sex marriage where the parties’ same-sex marriage was legally valid in their country of origin.

Children

Is there a legal distinction between legitimate and illegitimate children in terms of estate and succession planning?

For purposes of estate and succession planning, Cayman Islands law does not recognise a distinction between children born inside or outside marriage, unless the will of the decedent states otherwise.

Is there a legal distinction between natural and adopted children in terms of estate and succession planning?

For purposes of estate and succession planning, Cayman Islands law does not recognise a distinction between adopted children and natural born children.