The Cayman Islands has published a set of frequently asked questions detailing a law requiring that companies with geographically mobile activities have economic substance for tax purposes.
The frequently asked questions address the Cayman law’s notification and reporting requirements, discuss the meaning of “tax resident outside the island,” and discuss the treatment of entities that engage in more than one relevant activity.
The Cayman Island laws respond to pressure by the OECD and EU to limit the use of tax havens for tax avoidance where a company has little or no employes or other activities in the country.
As a member of the Inclusive Framework on BEPS, the Cayman Islands has agreed to meet standards set by the OECD Forum on Harmful Tax practices which requires that geographically mobile activities to have substance if activities are conducted in a no or nominal tax jurisdiction or in a preferential tax regime of a jurisdiction that has corporate income tax.
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