In a press release Rob Leadbetter, chairman of the Cayman
Islands’ own Insurance Managers Association of Cayman,
said, “It is wonderful to see acknowledgement by the UK
Government that the standards not only met, but set by
the Cayman Islands are recognised as being robust and
exemplary”. Leadbetter added, “The Cayman Islands’
financial services industry, including captive insurance,
has been built upon a philosophy of sound regulation and
transparency and hearing this publically stated comes as a
welcome validation of our efforts.”
It may be fair to say that new captive formations in the
Cayman Islands may still be affected by the perceived tax
haven reputation that is still portrayed in today’s media. Due
to a perceived reputational risk with the Cayman Islands,
captive owners may look for US domestic solutions.
However, with public acknowledgement of the Cayman
Islands’ tax transparency initiatives by world leaders and
actual participation in government to government tax
information reporting such as the conclusion of the FATCA
IGA, it is hoped that the Cayman Islands will be known for
clearly better business when it comes to captive insurance.
Summary
The Cayman Islands have undertaken many recent tax
transparency initiatives including concluding the US FATCA
IGA negotiations. FATCA has a potential significant impact
on US owned captives and other captives with US source
withholdable payments. Failure to comply with FATCA
would result in a 30% withholding tax. Use of a US tax
expert is likely in order to comply with the complex FATCA
legislation. It is likely most captives will be considered
NFFEs and thus not be required to partake in the rigors of
the FFI compliance. Fortunately the Cayman Islands are
beginning to garner the recognition for their involvement
in tax transparency. As such the Cayman Islands remain
a leading offshore captive jurisdiction and are ideally
positioned to retain and attract US based captive business.
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