Cayman Islands Financial Services

The Cayman Islands Monetary Authority (CIMA) formalised procedures for the exchange of supervisory information relating to United States and Cayman Islands banks and banking institutions operating in each others’ jurisdictions. The four main U.S. banking regulators that have become parties to the “Statement of Cooperation” are the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the Office of Thrift Supervision.

The issues covered by the document include sharing of information when a Cayman Islands or US regulated bank or banking institution who wants to set up a branch, affiliate or subsidiary in the other jurisdiction is seeking approval in that jurisdiction.

According to the statement of CIMA, the agreement came into effect after several months of negotiations, and its purpose is to enable the countries “to more effectively supervise entities for which they have overall responsibility, when those entities also have operations in the other jurisdiction.”

CIMA’s managing director Cindy Scotland said that entering of the jurisdiction into this agreement also answers the IMF recommendation stated in its report for the year 2009, on the Assessment of the Financial Sector Supervision and Regulation in the Cayman Islands. This report recommended that CIMA enter into agreements with home supervisors of international financial institutions it regulates in order to manage the risks involved in the cross border operations of such institutions.

CI Premier and Minister of Finance McKeeva Bush stated that the agreement is important from a regulatory and business perspective. He said that the agreement will “enhance CIMA’s effectiveness and that of the other regulators in executing their supervisory responsibilities with regard to cross-border banking entities.” He added that the agreement provides further evidence of the jurisdiction’s commitment to regulation and international cooperation, and shows the increasing stature of the country as an international financial centre.

The government of the Cayman Islands has announced that a Tax Information Exchange Agreement (TIEA) has been signed with the government of Canada.

To welcome the signing, Cayman Prime Minister McKeeva Bush said: “This is indeed an important day for as we have come together to mark a significant milestone in the long-standing relationship between the Cayman Islands and Canada through the tax information exchange agreement we have just signed.” He added that the signed documents provide for comprehensive tax information sharing arrangements, which reflects the jurisdiction’s commitment to upholding and implementing international standards in the global financial services sector.

According to Bush, the signing of the TIEA will have a positive effect on developing mutual cooperation between the Cayman Islands and Canada. As a result of favourable tax treatment for active business income earned by Cayman subsidiaries of Canadian companies, the document is expected to bolster economic flows.

The Cayman Islands entered into a Tax Information Exchange Agreement (TIEA) with Germany.

A signing ceremony was held on May 27, 2010. The Cayman Islands’ Premier, McKeeva Bush and Germany’s Ambassador to Jamaica, Jurgen Engel, signed the agreement.

The TIEA will allow for the exchange of tax information between the tax authorities of the Cayman Islands and Germany upon request, in case there is evidence of the perpetration of fiscal crime, or in civil tax matters.

Mr Bush said that the jurisdiction’s long-standing commercial ties with Germany make the signing an important step. He also welcomed the opportunity to host Ambassador Engel, a distinguished member of its foreign service. According to Bush, “Not only have Germany’s leading financial institutions held operations in the Cayman Islands for decades, but our 2 governments have worked closely together for many years, most recently as part of our mutual participation in the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes’ Steering and Peer Review Groups.“ Bush said that the Cayman Islands have had a bilateral agreement with Germany in effect since 2005 as part of the implementation of the EU Savings Directive, under which interest income earned by German citizens in Cayman Islands accounts is reported.

The governments of the Cayman Islands and Japan have initialled a comprehensive double tax agreement (DTA) to allow for the exchange of tax information in civil and criminal tax matters.

According to a statement issued by the government of Japan, “The government of Japan welcomes this agreement which enables both tax authorities to carry out the effective exchange of information regarding tax matters in accordance with the international standard, and demonstrates the Cayman Islands’ commitments to combating international fiscal evasion and tax abuse, the importance of which has been reiterated in a series of international conferences”.

Prime Minister of the Cayman Islands, McKeeva Bush, welcomed the agreement and added that the jurisdiction is pleased to have reached this DTA, particularly given the exceptional commercial relationships between financial services sectors of both jurisdictions.

The double tax treaty still requires signing. It will come into force after both countries have undertaken their individual ratification processes.

On May 13, an Tax Information Exchange Agreement (TIEA) was signed between the Cayman Islands and Portugal. The document was signed by Cayman Island Premier, McKeeva Bush, and Sergio Vasques, the Portuguese Secretary of State of Tax Affairs.

The TIEA is based on the Organization for Economic Cooperation and Development (OECD) model agreement. The document allows the exchange of tax information between the tax authorities of the 2 jurisdictions on request in case there is evidence of the perpetration of a tax crime.

At a signing ceremony, Bush stated: “It is my pleasure to sign a tax information exchange agreement this afternoon. We are particularly pleased to be signing this agreement on Cayman soil and are grateful to the Portuguese delegation for taking the time to visit our shores.” He also said: “Some of Portugal’s major financial institutions which have a presence in the Cayman Islands and are licensed by our regulator, the Cayman Islands Monetary Authority. We see this as a sign of confidence in our financial services industry and we hope that this agreement may help expand opportunities for more commercial activities between our 2 countries.”

The government of India will proceed with negotiations towards tax information exchange agreements with the Cayman Islands as well as other 8 low-tax jurisdictions.

The Indian government has approved the notification of the offshore jurisdictions for the purpose of the Income Tax Act 1961. These are the Cayman Islands as well as the British Virgin Islands, Gibraltar, Guernsey, Jersey, the Isle of Man, Bermuda, the Netherland Antilles, and Macau. Also, the notification of Hong Kong is in process.

The Cayman Islands and India could not enter into agreement until India’s Section 90 of the Income Tax Act was amended by the Finance Act 2009 as then India could enter agreements only with sovereign states.

On April 1, 2010, Assistant Treasurer, Nick Sherry, announced that Australia has signed 7 Tax Information Exchange Agreements (TIEAs). This move revealed its efforts to achieve greater transparency in tax-related issues.

Australia has announced that it signed a TIEA with the Cayman Islands.

Also, on March 30 and 31, Australia signed TIEAs with the following jurisdictions:
- Belize,
- the Bahamas,
- Dominica,
- Grenada,
- Saint Lucia,
- the Turks and Caicos Islands.

The government of the Cayman Islands has committed to the signing of further 16 Tax Information Exchange Agreements (TIEAs) with jurisdictions of economic significance. This is expected to be done in additional to the 14 TIEAs that have already been concluded.

According to the government, this announcement demonstrates Cayman’s commitment to transparency and the exchange of tax information in cooperation with 3rd country tax authorities, as regards the fight against tax evasion.

The Cayman Islands government announced that it has agreed to sign an agreement with Australia on March 30. Also, it is awaiting signing dates for the agreements with Aruba, Canada, Germany, Italy, Mexico and South Africa. In addition, negotiations with 9 additional OECD/G-20 countries are in various stages.

According to Caymans Islands Premier, McKeeva Bush, the jurisdiction looks forward to continuing this engagement. He said that Cayman is doing its part “in demonstrating the effectiveness of our transparency regimes and our expertise as a jurisdiction”.

On October 29, 2009, the Cayman Islands signed a Tax Information Exchange Agreement (TIEA) with the Netherlands Antilles. The signing took place at the Caribbean Financial Action Task Force (CFATF) plenary held in Curacao.

This is the 14th Tax Information Exchange Agreement signed by the Cayman Islands. It was signed on behalf of the Cayman Islands by the Cayman Attorney General, Samuel Bulgin.

When commenting on the signing, Bulgin said: “This signing represents the Cayman Islands’ continued commitment to OECD standards for transparency and exchange of information on tax matters. It will commemorate the beginning of what I am sure will be a mutually-rewarding relationship between the Cayman Islands and the Netherlands Antilles.”

According to the government, negotiations on signing TIEAs have also been completed with Aruba, Australia, Canada, Germany, Italy and Mexico. Agreements are expected to be signed by the end of 2009. Also, negotiations are ongoing with Argentina, Belgium, China, Czech Republic, India, Japan, Korea, Portugal, Spain and South Africa.

On October 14, the Ministry of Financial Services announced that the Cayman Islands has signed a tax information agreement with France. The Ministry expressed its hope that this agreement would help attract French financial institutions and companies.

According to the Ministry’s press release, the new treaty was signed with Paris via an exchange of letters on October 5, 2009.

This is the 13th bilateral Tax Information Exchange Agreement (TIEA) signed by the Cayman Islands. The jurisdiction has bilateral TIEAs signed with Denmark, Faroe Islands, Finland, Greenland, Iceland, Ireland, Netherlands, New Zealand, Norway, Sweden, the UK and the US.