Cayman Islands: Double Tax Treaties
Not having any taxes other than customs duties and stamp duty, the Cayman Islands did not, until recently, enter into any Double Tax treaties with other countries. It has, however, entered into limited tax treaties with the UK and New Zealand, and signed a comprehensive tax treaty with Japan in 2010 (see below) in addition to several tax information exchange agreements, which have ensured that the jurisdiction no longer features on the OECD's 'grey list' of territories which have not substantially implemented the internationally agreed tax transparency standard.
Cayman entered into a mutual legal assistance treaty with the USA, although the treaty specifically excludes fiscal matters. In November, 2002 the Cayman Islands also signed a Tax Information Exchange Agreement with the US (see below).
In March 2009, the Cayman Islands successfully concluded technical negotiations on a series of bilateral agreements with seven Nordic states, including tax information agreements, and went on to sign additional information agreements with G7 and OECD member countries in 2009 and 2010.
After the Cayman Islands was forced to accept 'information sharing' under the EU's Savings Tax Directive in 2004, the UK agreed to move discussion of a tax treaty between the United Kingdom and the Cayman Islands to the head of the queue. “The UK has moved the Cayman Islands to the front of the queue of countries and territories wishing to have treaty talks,” the UK’s Paymaster General, Dawn Primarolo told government leader McKeeva Bush in a letter dated May 20. In July, 2005, the UK government reiterated that it was giving a high priority to the question of a Cayman tax treaty.
In January 1999 the Cayman Islands government bowed to pressure from the UK and passed the Proceeds of Criminal Conduct (Amendment) (Foreign Offences) Law which introduces fiscal crime as a reason for enforcing foreign blocking and freezing orders - but only if a crime has been committed in Cayman, which has no concept of fiscal crime.
The Monetary Authority has bilateral information exchange agreements with 14 overseas regulatory authorities, and a multilateral MoU with eight authorities in the Caribbean.
In May, 2006, the Cayman Islands Monetary Authority (CIMA) and the Office of the Superintendent of Financial Institutions Canada (OSFI) signed a memorandum of understanding that provides a framework for cross border cooperation between the two countries.
The MoU establishes a protocol for the sharing of information and protection of information shared, cooperation regarding on-site inspections carried out by one regulator on supervised financial institutions in the other jurisdiction, and ongoing coordination.
OSFI is responsible for regulating and supervising all federally chartered, licensed or registered banks and insurance, trust and loan companies, as well as cooperative credit associations and fraternal benefit societies in Canada.
CIMA General Counsel, Mr Langston Sibblies, noted that the agreement was important since OSFI, as the federal regulator, has jurisdiction in all of Canada's provinces.
"The MoU will allow us to develop cooperative relationships in a structured and clear way and will further enhance supervision of Canadian entities operating here, particularly in the banking sector," he observed.
The MoU is subject to the domestic laws of both jurisdictions, as with other memoranda.
Mr Sibblies continued: "One area of concern for OSFI in negotiating the MoU was the preservation of confidentiality of information that would be provided under the agreement and the assurance that information received would be used for lawful supervisory purposes.
"On examination of our respective legislation we were both satisfied that our laws governing information exchange and deterring financial crime are equivalent. This facilitated the establishment of the MoU."
CIMA's Managing Director, Mrs. Cindy Scotland, said this agreement underscored the importance Cayman, as a major financial centre, placed on international cooperation.
"The MoU with OSFI again demonstrates our commitment to assist overseas regulators in a manner consistent with Cayman's laws as we pursue our mission of creating a competitive and internationally recognised financial services industry," she stated.
On February 21, 2008, a memorandum of understanding for the exchange of information and investigative assistance between CIMA and the FSA, the UK's national regulator of financial services and markets, was signed. The agreement provides a formal basis for cooperation between the two authorities.
The MoU is similar to the other agreements in place between CIMA and overseas financial regulators. It outlines the types of assistance that can be requested and given by CIMA and the FSA.
This includes: providing, confirming or verifying information; obtaining specified information and documents from other parties; discussing issues of mutual interest; questioning or taking testimony of persons designated by the requesting authority; arranging and/or conducting inspections of financial services providers; and permitting representatives of the requesting authority to participate in enquiries by or on behalf of the requested authority.
The MoU also outlines the procedure each regulator will use for making requests, and explains how requests will be assessed to determine if the required assistance can be given.
The agreement has provisions for the treatment of confidential information that each authority may receive under the MoU. Such non-public information can only be disclosed, the MoU states, "in accordance with disclosures permitted under its applicable laws, regulations and requirements".
According to CIMA's Managing Director, Cindy Scotland, the agreement represents a significant development for the Cayman financial services industry.
She announced following the signing of the agreement that: "The FSA is an important regulator of a major G7 country. We see this MoU as reinforcing our strong international cooperation regime and further demonstrating our commitment in this area."
In March 2009, the Cayman Islands and the seven Nordic countries, comprising of Denmark, Faroe Islands, Finland, Greenland, Iceland, Norway and Sweden, concluded technical negotiations on a series of bilateral agreements, including tax information agreements, at a meeting between the respective delegations held in Copenhagen on March 5-6.
These were second round negotiations, the first round having taken place in the Cayman Islands on April 17-18, 2008.
“We are very pleased to see these agreements come to fruition with our Nordic Group partners. It is proof of what can be achieved when parties approach negotiations in a fair manner, and we are keen to continue this trend, involving, on our part, effective arrangements for the provision of information on tax matters,” said Cayman Minister for International Financial Services Policy, Alden McLaughlin, adding: “This is further evidence that the Cayman Islands does not trade on secrecy or illicit tax activity.”
The seven tax information agreements were signed in Stockholm in April 2009, after all countries had completed their individual administrative protocols.
The collateral commercial agreements, also signed in Copenhagen, were due to be signed at the Norwegian Embassy in Paris in mid-June.
The Cayman Islands Monetary Authority has also entered into MoUs with regulatory bodies in Brazil, Malta, Argentina, the State of Washington, Jersey, Isle of Man, Bermuda, Jamaica, Panama and the Turks & Caicos Islands.