Cayman New Resident
The definitive guide to living and working in the Cayman Islands
Aug 31, 2014 

Investing

Last updated: 14th August 2013

This chapter provides information about wealth management in Cayman and includes details on investment opportunities on Grand Cayman from asset management to off-shore banking and property investment in the Cayman Islands. We also provide details of private banking and brokerage services to help you with your investment portfolio. Services range from hedge funds, equities, interest accounts, currency transactions and other investment vehicles in Cayman. Additionally we provide details of investing and saving tax considerations and alternative investment opportunities like annuities and property investment in the Cayman Islands.

The Cayman Islands is widely perceived internationally as a tax-free jurisdiction for both individuals and businesses. A more accurate description, however, would be to call Cayman tax-neutral. Although taxes are not levied on income or profits earned locally, an expatriate working in Cayman is obligated by the tax laws of their home country. In Cayman, tax is not due on wages earned locally or on profits and capital gains from investments. Moreover, there are no sales, goods and services taxes, or VAT, and many luxury goods are either partially or completely duty free. Lastly, there are no death or inheritance taxes.

As is common in all countries, however, governments need to raise revenue to meet their expenditures. In the Cayman Islands, the Government brings in income by relying primarily on customs duties, fees for work permits issued to expatriates, a variety of business licences, tourist accommodation tax and various fees imposed on financial services and tourism, the key industries here. Typically, import duty is 22% on any item* imported into the Cayman Islands, although the levy will vary on certain goods including vehicles, wines, spirits and some food items. Work permit fees range between CI$100s to CI$32,400 per permit per year following an increase in fees, ranging between 5% to 35% depending on the cost of the original fee, set out in the 2012/13 budget. Work permit fees alone raised CI$63.2 million in 2012. Company trade and business licensing fees also bring in a great deal of revenue with category 'A' bank and trust companies paying an annual fee of up to CI$1 million, and class 'B' banks (depending on their assets) paying between CI$60,000 and CI$100,00 every year. Stamp duty on the purchasing of property also raises revenue as do a multitude of other fees, which have ensured that residents do not need to pay tax on their income.

* Please note that new residents importing their used household and other personal belongings will not be subject to import duty within six months of their arrival on the Island.



Wealth Management 
There are compelling reasons for engaging the services of an investment advisor based in the Cayman Islands, either through the local office of a global firm or the asset management group of a local financial institution; expert investment guidance can be obtained in the resident's time zone and on a personal basis. The local advisor will be familiar with the asset allocation and types of investments that are appropriate given the resident's new tax status.

A number of overseas wealth management firms have offices in Cayman. Globally renowned private banks such as Barclays Private Bank, Butterfield Bank, HSBC, Royal Bank of Canada, Scotiabank and the asset management arm of the only bank headquartered in Cayman, Cayman National Securities, offer a sophisticated suite of investment solutions for clients with above average net worth. It is always advisable to seek guidance from an investment advisor who understands the tax and regulatory issues in the resident's home country.

Brokerage firms in the Cayman Islands offer a wide range of client accounts and a full suite of products. For example, there is ready access to the full spectrum of offshore hedge funds and funds-of-funds, with choices ranging from low volatility funds to those which are aggressive and specialised. There is access to a wide range of interest bearing securities, structured notes (including equity-linked notes), step-up bonds and Eurobonds denominated in multiple currencies.

Investment accounts that are designed to receive monthly contributions are not very common because deferred tax planning is generally not necessary. However, a number of the larger retail banks and brokerage firms can structure traditional brokerage accounts to receive monthly contributions and to invest those contributions in a portfolio of mutual funds.

Some of the leading organisations in the Cayman Islands offering wealth management solutions are listed here.

Butterfield Bank (Cayman) Ltd.
Butterfield House, 68 Fort Street
PO Box 705, Grand Cayman KY1-1107
Tel: (345) 949 7055 Fax: (345) 949 7004
Email: investments.cayman@butterfieldgroup.com
www.butterfieldgroup.com
Services offered: Private banking, asset management, trusts and estate planning, custody services and lending solutions.

Caledonian Global Financial Services Limited
Caledonian House, 69 Dr. Roy's Drive
PO Box 1043, Grand Cayman KY1-1102
Tel: (345) 949-0050 Fax: (345) 814 4862
Email: cayman.investorservices@caledonian.com
www.caledonian.com
Services offered: Banking, fiduciary, funds, securities and custody, and insurance.

Cayman National Corporation Ltd.
200 Elgin Avenue , George Town
PO Box 1097, Grand Cayman KY1-1102
Tel: (345) 949 4655 Fax: (345) 949 0774
Email: cnb@caymannational.com
www.caymannational.com
Services offered: Private banking, wealth structuring, trusts and investments.

CIBC FirstCaribbean International Bank
FirstCaribbean House, George Town
PO Box 68, Grand Cayman KY1-1102
Tel: (345) 949 7300 Fax: (345) 949 7179
www.cibcfcib.com
Services offered: Private banking, financial and wealth management.

Fidelity Bank (Cayman) Ltd
Cayman Financial Centre, Dr Roy's Drive
PO Box 914, Grand Cayman KY1-1103
Tel: (345) 949 7822 Fax: (345) 949 6064
Email: info@fidelitycayman.com
www.fidelitycayman.com
Services offered: Private banking, asset protection, financial planning, competitive pension plan and lending solutions.


HSBC Bank (Cayman) Limited
HSBC House, 68 West Bay Road
PO Box 1109, Grand Cayman KY1-1102
Tel: (345) 949 7755 Fax: (345) 949 7634
www.hsbc.ky
Services offered: Wealth management, retirement and education planning, deposit vehicles, diverse range of global currencies, customized portfolio construction, managed portfolios, global bonds, equity funds, alternative and money market funds and access to leading investment advisors around the globe. 

RBC Wealth Management
Royal Bank House, 4th Floor
PO Box 1095, Grand Cayman KY1-1102
Tel: (345) 949 9107 Fax: (345) 945 7256
Email: timothy.mccarthy@rbc.com
www.rbc.com  
Services offered: Investment advice, management, custody and brokerage; private banking, fund administration and trust services.

Scotia Private Client Group
Scotia Centre, 6 Cardinal Ave, #rd Fl, George Town
PO Box 689, Grand Cayman KY1-1107
Tel: (345) 914 6274 Fax: (345) 949 7097
Email: scotiaci@candw.ky
www.scotiabank.com/ky
Services offered: Private banking including customised lending solutions and financial planning, investment advice and management, wealth structuring including private trusts, foundations, private investment and custody.

Brokerage Services
There are a number of regulated wealth management firms based in the Cayman Islands that offer securities brokerage along with investment advisory and discretionary management services. In general investors need to make an initial investment of US$100,000-$250,000 or more to open an account with a full service provider such as Butterfield Bank, Cayman National Securities, Royal Bank of Canada or Scotiabank. Currently, OneTRADEx is the only fully licensed broker in Cayman that offers discount online trading to investors. A minimum deposit of US $5,000 is required to open an account with OneTRADEx.




OneTRADEx Ltd.
4th Floor Cardinal Plaze, 30 Cardinal Ave
PO Box 12177, George Town
Grand Cayman, KY1-1010
Tel: (345) 943-3212 Toll-free 1 (800) 381 1026 Fax: (646) 688 3541
Email: info@onetradex.com
Services offered: Online discount securities trading from a regulated brokerage account for offshore residents and expat investors, including non-resident U.S. Citizens.

Saving & Investing in Cayman
Working in the Cayman Islands, especially in financial services and tourism, is about being in a first-world environment while enjoying the year-long tropical climate, white sand beaches and warm, crystal-clear sea. Working in Cayman is also particularly rewarding as earnings and any savings or income and gains from investments are tax-free. Nevertheless, as the Cayman Islands is a tax-neutral jurisdiction, it is strongly recommended that all new residents taking up employment here take the following steps:
  1. Seek tax advice in your home country. The tax authorities in Canada, the UK and the US treat income differently when their residents are physically working outside of the country. All newcomers to the Cayman Islands should determine if it is advantageous to transfer savings and investments to Cayman or keep them at home. It is also very important to determine how long you need to be a non-resident before securing tax-free benefits, if it is possible at all. Tax legislation is continually changing, so it is imperative to have the latest information before making decisions on investing. For example, in the UK you have to be a non-resident for one full tax year in order to avoid tax on income. Visit www.hmrc.gov.uk for more information. US citizens are liable to be taxed on worldwide income, irrespective of where that income is physically earned, although you may be eligible for a foreign earned income exclusion, which is adjusted each year based on the inflation rate. In 2013 the tax allowance was US$97,600, after which all income earned abroad is liable to US tax. Canadian citizens have to prove that they have severed ties with Canada to avoid paying tax. If you are planning to take up residence in the Cayman Islands, but are still interested in opening a bank or investment account here, it is important to seek tax reporting guidance from an advisor in your country of residence. Financial institutions in Cayman are alert to, and are obligated to report on, known tax avoidance. They will want to be assured that there is full compliance at all times with the tax laws of the home country.
  2. As soon as is practical after arrival in the Cayman Islands, a local bank account should be established. This will enable you to have a cheque book, a debit card and to use ATMs. A note regarding chequing accounts: most local banks impose significant monthly and transaction fees on chequing accounts unless fairly significant average balances are maintained. Butterfield Bank (Cayman) for example, points out to new customers that the bank maintains the payment details of several hundred local merchants and service providers. This, together with easily accessible online banking, can mitigate the need for having a chequing account, since bills may be paid electronically. In this instance, customers are granted savings accounts in either US$ or CI$. Funds maintained in these accounts are fully liquid at all times and the accounts can be readily accessed online or at ATMs. Several banks in Cayman offer online and direct-debit banking services. (Note - banks in  Cayman are strictly regulated by the Government-run Cayman Islands' Monetary Authority, which has the regulatory and oversight functions of a central bank, but there is no equivalent in Cayman to Federal Deposit Insurance in the US, which means that deposits are not protected if a bank should be declared bankrupt).
  3. Consider the establishment of an investment account. This will enable new residents to take advantage of some of the other services that banks offer, such as investment advice, brokerage services and, for those with significant assets, discretionary investment management. Most of the retail banks in Cayman have a full range of financial services and there are an increasing number of specialised financial institutions that advise individuals who are looking for private banking or wealth management facilities. 
  4. Arrive prepared to meet local requirements for establishing banking and investment relationships. Local due diligence calls for having readily available documents that confirm the personal identity and other particulars of an applicant. The requirements may vary with each institution, but generally the following are required:
    • Valid original passport. Most financial institutions need to see and maintain a copy of original passports in their client records, although some banks will allow a notarised copy of the photo page of the passport if the applicant is unable to apply in person.
    • A second photo ID, duly notarised.
    • Confirmation of residential address in  Cayman. This would be difficult if a local residence has not been established at the time of application; in such an eventuality, this requirement is likely to be waived.
    • A reference from a bank where the applicant has been a client for more than three years.
    • A professional reference from an accountant or lawyer who has known the applicant for more than three years. (References must be addressed to the specific bank where the account is being established and, therefore, it is advisable to determine which bank this will be before arrival in Cayman. Letters can be addressed to "Dear Sir/Madam" but the name of the bank must be referenced.
    • Evidence of the source of funds. It is strongly recommended to avoid bringing large amounts of currency or traveller's cheques into the country. Cayman banks are extremely vigilant about money-laundering and would rather not have new business than take the slightest risk of accepting tainted funds. It is customary for Cayman banks to ask a new client, at the time a new account is established, to estimate the average account balances going forward and to specify the usual source of incoming funds, e.g. regular salary payments. It is not uncommon for banks to periodically call a client and inquire as to the source of incoming funds when an unusually large transaction takes place in an account.
    • Consider future plans. If planning to return to a country that is not US dollar denominated, consider converting CI$ or US$ denominated earnings to the home country currency on a regular basis. If all of your savings are in CI$ and you only convert it upon returning to the home country, it is possible that exchange rates could move adversely and negatively impact the value of your savings once converted into your home currency. Converting funds on a regular basis will tend to mitigate this. A broker or financial advisor will be able to provide guidance in this regard. 
    • Factor into investment planning an eventual return to the home country. At that time, it would not necessarily be advisable to liquidate all investments held locally and repatriate the funds. To make the appropriate decision at that time, it is very important to be fully aware of your individual tax situation and what you are legally allowed to do. Whilst in Cayman, it may be advantageous to establish a Cayman-registered company or trust to own investments; these could potentially provide tax advantages upon returning to the home country. Most local banks have a trust department that can provide expert guidance and they will advise on the best strategy based on each client's personal situation. However, please see the Domicile & Tax section on our website before establishing a trust as you might trigger inheritance tax if it is done too soon.  
Annuities
Life insurance is designed to protect the insured against premature death; an annuity is designed to protect the annuitant against the risk of living too long and possibly outliving his or her financial resources during retirement. An annuity is a legally enforceable written contract between an insurance company and a contract owner under which the insurer promises to make a series of periodic payments to a named person in exchange for a lump sum premium or series of premiums. In the US, annuities receive favourable tax treatment and are a means to accumulate and protect wealth prior to retirement.

Traditionally, annuities were also known as an "income for life" as the periodic payments could be planned to pay an individual for life. However, annuities can also be used for a pension and for funding advanced education for children.

One insurance company which provides annuities in Cayman is:

Sagicor Life of the Cayman Islands
1st Floor Harbour Place, George Town
PO Box 1087, Grand Cayman KY1-1102
Tel: (345) 949 8211 Fax: (345) 949 8262
Email:customerservicecayman@sagicor.com
Products offered: Immediate and deferred annuities and investments.
 

Investing in Cayman Property
To date, Cayman real estate has proven to be an attractive and profitable investment. Apart from a one-time stamp duty of 7.5% there are no annual property taxes or restrictions on foreign ownership by individuals. Property can be passed on duty-free to family members by 'love and affection' and vacant land can be owned and held for future investment potential. Title to land is recorded in a modern, reliable and centralised land registry, where every plot of land is mapped and given a descriptive title number based on location, and title is granted and guaranteed by the Cayman government. Any encumbrances such as mortgages, rights-of-way and cautions pending contract are recorded on the title register of that parcel of land. Buildings are subject to planning regulations and are required to be constructed to high standards. These are monitored by the Cayman Islands Central Planning Authority and Building Control Unit, which carries out inspections.

A casual review of the Cayman Islands Real Estate Brokers Association's (CIREBA) website (www.cireba.com) will show the diversity of land and properties available for sale and it would be safe to say that the market has something to offer to anyone who has an interest in property ownership. The process of finding a property is a simple process and the CIREBA association encourages you to work with one person who has access to 95% of all the listed inventory across the three Islands.

There are many affordable townhouses for sale as well as family homes and the further you go out some have large gardens. There are also very desirable plots of land for sale including in-land, canal-front and waterfront lots. Historically, buying land and building a home has been very popular with Caymanians. Waterfront properties on Seven Mile Beach have always been a good investment and though the recent trend has for the new ultra-luxurious condominium, the older properties on Seven Mile Beach often offer better value for money and deals are available. However, according to Re/Max agent, Michael Joseph, there is no 'flip' industry in Cayman; it takes approximately 465 days to sell a house, 365 days to sell a condo and 5-7 years to make a profit.

Another option, and a popular alternative to buying a property outright, is buying into a timeshare. The Morritt's Tortuga Club and The Reef Resort, both in East End, are good examples of popular and well run time shares with first class amenities. Indeed in East End, the Morritt's Tortuga Club is so confident of the timeshare industry growing that they are building a new three story shopping centre which will consist of retail space and apartments. They are also building a sports facility called Wimbledon Park which will consist of two tennis courts, a swimming pool, a club house and 58 one, two and three bedroom units for sale - designed to help their owners and guests keep fit and entertained while on vacation. Also, after years of being asked by a significant number of owners whether they could purchase a whole unit, they have now agreed to offer the Morritt's Residences. These will be 15 individual one and two bedroom units which are for sale as individually-owned condominiums. They can be put in the rental programme when not in use and have access to all the resort's amenities, maintenance and security. For more information call Carol Tamblyn on (345) 924 5886, email: ctamblyn@morritts.com or visit www.morritts.com.

Copyright 2014 The Resident Magazine 2014. All rights reserved.
Acorn Publishing Co, PO Box 31403, Grand Cayman KY1-1206, Cayman Islands,
Tel: (345) 946 3200 Fax: (345) 946 2830 Email: info@acorn.ky
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