The effects of
Cayman is a well-regulated and effective domicile yet, like other offshore
domiciles, it has become the target of various international bodies that wish
to impose their own regulatory ideas. Artex’s Kevin Poole examines the recent
rules and legislative changes that have been made in response.
Since the passing of the regulations, guidance has been published
that helps to clarify what constitutes a relevant entity and relevant activity
and the various items to be considered to help determine whether an
entity satisfies the ES test.
Starting in 2020, a relevant entity shall notify TIA annually whether or
not it is carrying on a relevant activity. Going forward a relevant entity
must satisfy the ES test and submit a report 12 months after the last day
of the end of each financial year of the relevant entity.
Boards should consult with their Cayman Islands legal advisor and/
or insurance manager to determine whether they meet the definition of
“relevant entity” and if they satisfy the “relevant activity” requirements
of the ES Law and minute their findings accordingly and give the
necessary authority to their insurance manager to make all necessary
filings on their behalf.
The Cayman Data Protection Law (DPL) 2017 regulates how businesses
and government agencies must handle all personal data in the Cayman
Islands and provides a framework of rights and duties designed to give
individuals greater control over their personal data.
The law specifically covers how such data is collected, processed,
stored or transmitted, and destroyed, particularly when dealing with
Institutions such as the EU, the G20, the Organisation for Economic
Co-operation and Development and the Financial Action Task
Force (FATF) have all passed rules that have implications for
captives and other companies doing business in Cayman.
Below are some of the key resulting regulatory developments, and
how they will impact Cayman captives.
In December 2018 the Cayman government passed new economic
substance (ES) rules and laws to avoid an EU tax blacklisting. The EU
is specifically targeting companies based in low- or no-tax jurisdictions
that have little or no economic activity but attract substantial profits
The new rules require Cayman-registered companies active in nine
defined areas, which includes insurance, to demonstrate they have
“adequate” economic activity locally to justify the profits they make.
Of note is that certain companies that have elected to be a Cayman
Islands Company, but are tax resident outside the Islands (such as those
who have taken the 953d election) are not subject to the substance
requirement of the ES Law and may be entitled to an exemption from
these rules but not from the requirement to make a notification to the
Cayman Tax Information Authority (TIA).
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