Cayman Islands Financial Services

On December 4, 2010, the government of the Cayman Islands announced initialing a tax information exchange agreement (TIEA) with Indonesia. This announcement followed negotiations in the beginning of December in Grand Cayman.

Welcoming the agreement, Head of the Cayman Islands’ delegation, Attorney General, Samuel Bulgin, said that this TIEA shows the development of a new partnership between the two jurisdictions. The document will render further transparency and business between the Cayman Islands and Indonesia. He said: “We certainly look forward to a prosperous working relationship and hope to finalise and sign the TIEA early next year.”

The agreement is to be signed. Then, ratification procedure will be required for both countries before it enters into force.

According to statistics published by the OECD, the Cayman Islands has concluded 19 TIEAs with other nations.

The official adoption by the Organisation for Economic Cooperation and Development’s (OECD) Global Forum on Transparency and Exchange of Information has been noted by the Cayman Islands.

This was announced at the recent meeting of OECD in Singapore in a report that included details on the Cayman progress in adhering to international standards, particularly in the realm of tax transparency.

The Cayman Islands was among the 1st in the world – it was 1 of 8 countries to be assessed under the Global Forum’s Peer Review Programme. The reports for the countries assessed by the OECD were approved at the Peer Review Group meeting held in July 2010 in the Bahamas. These were eventually formally adopted at the OECD’s Singapore meeting.

It is worth noting that the Cayman Islands is a member of the Global Forum and a member of the Steering Group and Peer Review Group.

The meeting was attended by a delegation headed by the Cayman Premier and Minister for Finance, McKeeva Bush. When addressing the Global Forum, he highlighted the importance of the Peer Review and commended fellow Peer Review Group members for their excellent work.

The Cayman Islands has already entered into 19 tax information exchange agreements. It also initialed 2 further agreements – with India and Greece – to be signed soon.

The Cayman Islands has signed Tax Information Exchange Agreement with Mexico, aimed at further strengthening international cooperation regime of the jurisdiction. The TIEA was considered legally binding after being signed by the Cayman Islands Premier and Minister of Finance McKeeva Bush and Ernesto Javier Cordero Arroyo, Minister of Finance and Public Credit for Mexico. The agreement was signed on 28 August 2010. This is the twentieth TIEA for the jurisdiction, the last one was signed between the Cayman Islands and Canada. The Cayman Islands has TIEAs with other countries – members of G7 and G20, including Australia, Germany, France, the United Kingdom and the United States.

Premier McKeeva Bush said in his comments that this agreement also signifies new chapter in the relationship between Mexico and the Cayman Islands, “encouraging further economic development and improved relations, boosting the jurisdiction’s reputation amongst Mexican investors.”

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.