The Cayman Islands revise the budget measures for 2012-2013 fiscal year

14.08.2012

The government of the Cayman Islands is planning to spread the burden of tax hikes to financial services and tourism sectors due to the new budget measures which were announced to replace the proposals including direct taxes on workers – expatriates (expats).

The announcement of these measures was made by the PM McKeeva Bush that follows the government’s commitment of preventing the proposals of introducing of the first direct tax on the Cayman Islands which involves 10% levy on the income of workers – expatriates (expats) above the prescribed threshold.

In accordance with the latest changes that will be tabled before the legislative Assembly on 20^th August 2012:

1) fees for work permit above USD 1000 will increase by 35% on the progressive basis;

2) the tourism accommodation tax* will rise from 3% to 13%;

3) registration fees for some investment vehicles and exempted limited partnerships will be hiked;

4) pleasure craft and non-commercial vessels of over 30 feet in length will be taxed by a new levy for berthing in the Cayman Islands.

It should be noted that proposals were developed in order to achieve the budget targets agreed with the FCO (the United Kingdom's Foreign and Commonwealth Office) after confirmation that the UK will no longer approve the Cayman Islands’ increasing borrowings to serve their budgetary deficit.

Expert’s opinion

This situation shows directly the financial dependence of the Cayman Islands from the Great Britain which leads to the strengthening of the tax policy in the offshore jurisdiction. Under the Agreement concluded with the FCO (the United Kingdom's Foreign and Commonwealth Office) the Cayman Islands are obliged to achieve the budget surplus in 2012-2013 fiscal year that will enable to direct USD 29 mln to serve the territory’s debt.

It is evident that these measures can deter potential investors from conducting business in the Cayman Islands. However, among the advantages it should be highlighted that today changes non-essentially affect companies’ taxation, in fact only several registration fees (exempted limited partnerships named above).

On the basis: http://www.gov.ky/portal/page?_pageid=1142,5442200&_dad=portal&_schema

Julia Akhmetova ( Paralegal of Moscow office of Honest & Bright Ltd)