Cayman Islands Financial Services

It has been discussed that a special economic zone is to be launched by the Cayman Islands, in partnership with Cayman Enterprise City (CEC). The signing of an agreement with CEC has been announced by the government of the Cayman Islands. The newly-signed document allows the developer exclusive rights to construct, develop, operate and maintain a special economic zone (SEZ) in the Cayman islands. The agreement is aimed at attracting global science, technology, commodities and derivatives, media, and educational entities to the Cayman Islands.

McKeeva Bush, the Cayman Island’s Prime Minister said that CEC provides an opportunity for the jurisdiction to diversify its economic base. He also noted that this project requires no government investment because it will be completely privately funded. Also, the developer has not requested waivers for duties on materials or stamp duties.
While SEZs exist in a number of developed and emerging economies, the Cayman Islands’ SEZ will be the 1st in the Caribbean region.

Jason Blick, the CEO of CEC, said that the cooperation and inward investment-friendly attitude of the government of the Cayman Islands and the Civil Service have been outstanding. He noted: “They truly understand the positive effect the zone will have on Cayman, and their support has been incredible.”

The development of CEC’s 5 “parks” (Cayman Internet Park, Cayman Media Park, Cayman Biotech Park, Cayman Commodities Park, and Cayman International Academic Park) will be phased, with construction of the 1st phase expected to begin in 2012.

Currently, the Cayman government is to start establishing the legislative framework for CEC to operate.

The economy of Cayman Islands exceeded growth estimates for the 1st quarter of 2011, which was conditioned by higher levels of company formations and tourism.

In accordance with the figures on the Cayman Islands’ economy for January to March 2011 released by the Economics and Statistics Office, growth of 1.2% was achieved by the jurisdiction in the 1st quarter of 2011. This figure is higher than the 0.9% growth that was forecast for the entire 2011.

The government stated that several positive results contributed to this growth. These results include an increase in new company registrations by 11.9%. Also, the tourism industry experienced strong performance, with air arrivals up by 6.8% and cruise ship passenger numbers increasing by 8.2%. The statistics showed that the number of property transfers rose by 20.3%, which complemented a 271.2% rise in the value of properties transferred in the quarter that amounted to USD 253.9 million.

Premier and Minster for Finance McKeeva Bush commented the following: “I, along with the government, am very upbeat with respect to the future performance of the economy – which is based not only on positive results achieved in the first quarter of 2011 but also on the partnerships and initiatives that the government has forged with the private sector. We are encouraged by the 2011 first quarter results and by the Islands’ bright future prospects.”

A special economic zone is to be launched by the Cayman Islands, in partnership with Cayman Enterprise City (CEC). The zone is aimed to attract global science, technology, commodities and derivatives, media, as well as educational entities to the jurisdiction.

On July 18, an agreement was signed to allow CEC the exclusive right to construct, develop, operate and maintain the special economic zone. The government of the Cayman Islands has announced its intention to start establishing the legislative framework for CEC to operate. More than USD 327 million is to be invested over the next 8 years.

CEC is to develop 5 “parks”: Cayman Internet Park, Cayman Media Park, Cayman Biotech Park, Cayman Commodities Park, and Cayman International Academic Park.

Cayman Premier, McKeeva Bush, commented on the deal: “CEC represents an opportunity for the Cayman Islands to diversify its economic base. It’s also worth noting that this project requires no government investment, as it will be completely privately funded, and the developer also has not requested waivers for duties on materials or stamp duties.”

Although there was a fall in GDP in 2010, the economy of the Cayman Islands is expected to return to growth in 2011. This was stated by Premier and Finance Minister McKeeva Bush.

When “The Cayman Islands’ Annual Economic Report 2010″ was released, Bush commenting on it saying that the positive trend would be repeated through to 2014. These expectations were based on local economic forecasts as well as on the prediction of modest worldwide growth, coupled with the anticipated results of government action in the private sector.

According to the report, the Cayman Islands’ GDP fell by 4% in 2010, which was an improvement on the 7% decline seen in 2009. This decline is attributable to problems in the construction, real estate and financial services industries. As a result, real GDP per capita decreased from KYD 43,363 (USD 52,107) in 2009 to KYD 42,605. Inflation averaged 0.3% in 2010. However, due to rising international food and oil prices, it is predicted to increase to 1.9% in 2011.

The report shows that there were 2 opposing trends in the financial services sector. On the one hand, new company registrations and new partnerships rebounded, while, on the other hand, the report reveals downturns in mutual fund registration, stock exchange listings, insurance licenses and bank and trust licenses.

In accordance with the date provided in the report, the availability of banking credit improved. Domestic credit from commercial banks grew by KYD 171.3 million. Public sector financing from the local banking sector was up by 16.8%, and credit to the private sector rose by 5%.

It is expected in the report that GDP will show a growth of 0.9% in 2011, which will be partially fuelled by a strong recovery in tourism (in 2010 it was up by 5.2%).

According to “The Cayman Islands’ Annual Economic Report 2010″, the Cayman Islands’ government can anticipate a robust performance in the financial services industry.

Certain types of hedge funds for the first time will be regulated and taxed by the Cayman Islands. This measure has been introduced under a new measure brought in by the Budget.

The Budget that was delivered by Premier and Finance Minister McKeeva Bush on June 10, 2011 introduced only one new revenue measure.

This provides for the regulation of “master funds” in particular by the Cayman Islands Monetary Authority (CIMA). As noted by Bush, this is the general practice in other offshore jurisdictions. Such funds are not currently regulated in the Cayman Islands, but, under the new rules, will be obliged to pay a KYD 1 500, which is USD 1 842 fee per year.

As a result of a consultation process, the Cayman Islands is to amend its Companies Law in order to enhance the competitiveness of its financial services industry.

When tabling the Companies Law (Amendment) Bill, 2011, McKeeva Bush, Cayman Premier and Finance Minister, highlighted that the expected benefits the jurisdiction’s local industry is to reap and noted that new opportunities for growth are predicted.

The Bill’s drafting was participated in by the Ministry of Finance, the Registrar of Companies, and the Cayman Islands Monetary Authority (CIMA).

Provisions of the Companies Law include the following:
- amendments to the Cayman Island’s merger provisions;
- updates to foreign company provisions;
- special resolutions permitting different thresholds for different matters;
- changes to treasury shares, share redemption and repurchase, and paperless share transfer;
- permitting company names in a foreign script;
- segregated Portfolio Companies (portfolio names, director’s liability, segregation of assets and termination of SPCs).

Bush said that the process by which these amendments were prepared reveals the government’s renewed partnership with the private sector, ”which has been instrumental in soliciting the views of industry and providing input into the drafting process”. He noted: “These amendments are the end result of an extensive consultation process, aimed at addressing client and market-driven issues that have arisen in practice. It is expected to increase the attractiveness of the Cayman Islands as a domicile for corporate entities and maintain our competitive edge”.

The Cayman Islands’ temporary 1-year pension contribution suspension is to end, which is to affect private sector both employers and employees, as well as self-employed individuals.

In April, 2010, this measure was introduced with an amendment to the National Pensions Law. The measure was to provide a temporary 1-year suspension of pension contributions and a temporary 2-year suspension period for non-nationals. According to the government of the Cayman Islands, it was implemented in response to the global economic recession. It was aimed at easing people’s financial burdens and stimulating the economy.

Recently, the Cayman government has issued a reminder that, as of April 26, Caymanians from their first day of employment are pensionable immediately, required to participate in a pension plan and pay pension contributions.

Rolston Anglin, the minister responsible for pensions, commented: “These contributions are extremely important to continue each employee’s long-term savings for retirement. It’s a critical part of their retirement planning”.

Cayman Finance, a private-sector membership-based organisation that promotes Cayman’s financial services industry through public relations, public affairs and marketing initiatives has announced that Richard Coles has been voted in as its incoming chairman.

Coles is former Attorney General for the Cayman Islands with an impressive resume. He is currently an independent director for hedge funds, structured finance vehicles and investment and financial sector companies and had built a successful law firm in England before he moved to the Cayman Islands. So, he should be a good leader for Cayman Finance, which is the voice of Cayman’s financial services industry.

At an annual general meeting of Cayman Finance held on April 13, 2011, Coles was talking about his commitment and his capabilities to further develop Cayman Finance’s relationship with the Cayman Government.

Also, a new board was elected. The directors of Cayman Finance are Peter Cockhill (Ogier), Nick Freeland (PWC), Gonzalo Jalles (HSBC), Mark Lewis (Walkers), Roy McTaggart (KPMG), Conor O’Dea (Butterfield), David Roberts (Cayman Management), Daniel Scott (Ernst & Young), Henry Smith (Maples and Calder), Ian Wight (Deloitte).

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On March 21, A Tax Information Exchange Agreement (TIEA) that is designed to strengthen the commercial relationship between the Cayman Islands and India was signed by the 2 countries.

This is the 22nd agreement signed by the Cayman Islands. Premier McKeeva Bush said that the government of the Cayman Islands has a strong working relationship with Indian government, so the jurisdiction looks forward to implementing the terms of this TIEA.

On behalf of India, the document was signed by High Commissioner to the Bahamas, the Cayman Islands and Jamaica Mohinder S. Grover. He commented that both the Cayman Islands and India are members of the OECD Global Forum Global Forum on Transparency and Exchange of Information for Tax Purposes, therefore it is important to ensure the effective implementation of the international standards of transparency and exchange of information for tax purposes.

George McCarthy of the Cayman Islands International Tax Cooperation Team said that the TIEA “will provide a common ground upon which the Cayman Islands and India can exercise mutual cooperation and focus on increasing investment funds business in the Cayman Islands”.

The government of the Cayman Islands has announced expanding its network of Tax Information Exchange Agreements (TIEAs) with the signing of its 21st agreement.

The agreement was signed on February 7 between the Cayman Islands and Japan.

The document was inked at the Japanese Embassy in London. On behalf of the Cayman Islands, the TIEA was signed by the Cayman Islands’ Premier and Minister of Finance, McKeeva Bush, and, on behalf of Japan, it was signed by Hitoshi Noda, the Chargé d’Affaires ad interim.

Following the signing of the agreement, Bush commented that the development of the jurisdiction’s tax negotiation process is becoming increasingly valuable to the financial services sector. He noted that the signing of such an agreement with Japan provides benefits to both parties as well as signifies a new type of relationship.

It should be noted that the terms of this Tax Information Exchange Agreement include provisions for pensioners, students, government employees and residents of Japan, in that they will not be subject to double taxation.