Cayman Islands Free Trade Zones

Cayman Islands Free Trade Zones

The Cayman Islands Free Trade Zones mainly comprises the Cayman Enterprise City. According to fDi Intelligence, a news and foreign direct investment publication, the Cayman Islands are home to the best free trade zone in the Americas, and one of the best free trade zones in the world.

Cayman Enterprise City, the jurisdiction’s free trade zone, was ranked as the 5th best free trade zone in the world in fDI Intelligence’s annual awards and rankings for 2020. These rankings were tabulated based on surveys completed by government entities and investment promotion bodies based on details of the attractiveness of their zone, information about their facilities and what kind of incentives were offered.

Apart from these two accolades, Cayman Enterprise City was also voted as the best Cayman Islands Free Trade Zone for Small and Medium Enterprises in the Americas, and won other accolades in categories such as Data Protection, Events Organized, Red Tape Reduction, Skills Development, Workforce Training, Diversity Initiatives, Deployment of Technology and Facilities Upgrades & Expansions. As the CEO of Cayman Enterprise City, Charlie Kirkconnell best put it, this is an indicator of “quality and trust” for foreign investors and proof of “the success and strength” of the jurisdiction.

Foreign Direct Investment in The Cayman Islands

• The respective aforementioned accolades for Cayman free trade areas would not have been possible without the underlying complementary policies to “provide a well-regulated, structured and nurturing environment for global investment”, as acknowledged by Minister Joseph Hew of the Cayman Government.

• Such policies have allowed the jurisdiction to attract vast amounts of foreign direct investment, making it one of the largest offshore financial centres and a hot bed of economic opportunity for prospective investors in the Carribean region. In its first ten years, it was estimated that Cayman Enterprise City had an economic impact of up to US$502 million on the Cayman economy.

• With a total Foreign Direct Investment (FDI) stock valued at almost USD 1.5 billion, the country’s foreign assets vastly outvalues its domestic assets, a sign of the reliance of the Island on external trade and investments. This also means that The Cayman Islands must implement policies to facilitate and encourage this in order to sustain its economic growth. With such policies in place, the financial services sector has become the country’s second largest contributor to Gross Domestic Product, and the country has also become the eighth largest banking centre globally.

• The strength of its banking and financial sector alongside other factors such as a solid legal system and a stable political and economic climate has allowed to continue attracting and retaining new foreign investors to set up business in the Cayman Islands and the Cayman Islands Free Trade Zones.

• The attractiveness of setting up business in The Cayman Islands has only increased with the establishment of Cayman Enterprise City, a combination of special economic cities and parks focused on different areas that offer several benefits to companies incorporated within its boundaries. Let Tetra Consultants introduce you to Cayman Enterprise City, the free trade zone benefits it can offer your business, and how we can help you to register your business within to capitalize on the economic opportunities offered by the country.

Introduction to Cayman Enterprise City

• Cayman Enterprise City is located on Grand Cayman, the most populated region of the Cayman Islands. It is the only free trade zone in the country but is divided into several cities and parks with different specialties. This enables the free trade zone to offer synergies with several different business activities, ensuring it can cater to all your investment needs.

• These cities are Cayman Tech City, Cayman Commodities & Derivatives City, and Cayman Maritime & Aviation City. Cayman Tech City is further segmented into Cayman Internet Park, Cayman Media Park and Cayman Science & Technology Park. As you can see, these cities and parks cover a broad spectrum of business activities, allowing Cayman Enterprise City to serve as a global platform for innovation and technology development by enticing investors and businesses providing specialized skills to enrich the Cayman Islands economy.

• Governed under the Special Economic Zones Law 2011 alongside its revision and amendment in 2017 and 2020 respectively, all SEZs fall under the supervision of the Special Economic Zones Authority. In 2011, Cayman Enterprise City became the first special economic zone to be established in the Cayman Islands. Since then, they have aimed to develop world-class SEZs to promote the development of specialized industries based on technology and information and serve the needs of the Caymanian community by offering a platform for innovation and creating meaningful opportunities for its residents.

Beneficial taxation and regulatory systems in Cayman Enterprise City

• Currently, businesses and individuals in Cayman Enterprise City will enjoy full exemptions on income, corporate and capital gains tax. These tax exemptions are expected to stay in place for another forty years until 2061, offering businesses certainty in such tax-free zones so that they can more accurately plan for the long term. Businesses are also granted exemptions from import and export duties, real estate, stamp duty and inheritance taxes.

• It is also easier to set up and manage your business within the special economic zone since the Cayman Islands company registration process is fast tracked and regulatory costs can be paid in a consolidated manner to the Cayman Enterprise City as opposed to the individual authorities. This cuts down the time for a 5-year work visa to be granted to just 5 days, and the time to incorporate a business to as little as 4 weeks, as compared to 3 months for an annual work visa, and 6 weeks for regular incorporation in The Cayman Islands.

• As we can see, Cayman Enterprise City offers some of the most favourable taxation and regulatory systems for your business, with its special tailored policies being a lot more responsive and flexible as compared to other national level policies. These preferential business and trade laws thus work alongside the generous tax exemptions to attract foreign investments into the country, fitting into the Caymanian government’s larger plans in reforming and opening the country to foreign investment, helping to facilitate international trade and innovation making the Cayman Enterprise city the most alluring foreign trade zone for foreign investors.

Intrinsic infrastructural benefits of Cayman Islands free trade zones

• On an intrinsic level, free trade zones come with their own side of benefits in that they consolidate the supporting services and facilities needed for such industries to operate. Many countries have tried to replicate the success that we have seen in the Silicon Valley, as we see in Ireland, with the area around Grand Canal Dock even being nicknamed the Silicon Docks. This is because these FTZs have their own logistical infrastructure in place or might even have specialized institutions for mediation in business disagreements.

• The effects on human capital must also be considered. Cayman Islands is no exception to this and has even taken it further with the Cayman Enterprise City’s specific focus on learning and development within the community. Companies in the Cayman Enterprise City are also actively engaged with the entrepreneurial community in the country, offering networking opportunities, mentorships and internships whilst conducting workshops and special lectures, creating unique and dynamic career opportunities for Caymanian residents.

• This has helped to facilitate knowledge transfer by consolidating similar industries together to create location economies that facilitate collective growth and development for all firms within the free trade zone. As the reputation of the free trade zone develops, it becomes self-reinforcing in helping the zone to develop further. As they develop further, the reputation of the zone increases, making it easier for them to attract both talented individuals and prospective investing firms, which then enables it to develop even further.

How to register a Cayman Islands Free Trade Zones business in Cayman Enterprise City?

• Cayman Enterprise City provides a streamlined, 4-step application process that will allow you to incorporate your business faster and easier in the Cayman Islands free trade zone as compared to the traditional application process.

Step 1: Incorporate your Cayman Islands Free Trade Zones business

• We would recommend that you use a corporate service provider to incorporate your Cayman Islands business. Tetra Consultants is experienced in Cayman Islands business registration and provides you a full suite of services that will allow you to begin operations with your Caymanian business within 4 weeks. We will also help you to navigate through the free trade zone requirements and liaise with the Cayman Enterprise City team to help you complete the online zone application with the Special Economic Zone Authority.

Step 2: Approval of Cayman Enterprise City License Agreement

• We will work alongside the Cayman Enterprise City authorities to draft a CEC License Agreement for your approval. We will also prepare and submit the necessary forms such as the SEZA trade certification application (form 1), SEZA customs trader  identification number (form 2) and personal questionnaire (form 4), alongside supporting documents such as Letters of Support and personal documents. The processing time for these SEZA certificates will be five business days.

Step 3: Apply for Trade & Employment Certificates

• We will assist you in applying for your Zone Trade Certificate and SEZA employment certificates for your non-Caymanian workers. To do so, we will prepare and submit SEZA employment certificate (form 3) alongside the necessary supporting documents to the WORC, Workforce Opportunities & Residency Cayman (The Department of Immigration). The processing time for this step will be five business days.

Step 4: Approval and commencement of operations

• Once all the certificates are approved, you can commence operations immediately by opting for Cayman Enterprise City’s fully furnished office solutions. Alternatively, Tetra Consultants can also provide a local registered office that fits your business needs.

Benefit of starting a business in Cayman Enterprise City

Professional support through the Cayman Enterprise City’s Client Experience Team

• As evidenced through the assistance they offer in incorporation, the Client Experience Team can provide your business with the best professional support that your business would need to navigate the business regulatory environment of The Cayman Islands. This team helps you to go through the already streamlined process set out by the Cayman Enterprise City, ensuring that all the necessary registration and applications are consolidated into service packages that ensures ease of payment and removes bureaucratic delays. They are a strategic connector that ensure a concierge-style service from the beginning to the end of the incorporation process.

Well-developed digital business infrastructure

• As mentioned earlier, The Cayman Islands has attained awards from fDi Intelligence specifically with regards to Data Protection and privacy policy. This ties into their Digital Cayman initiative, a dynamic industry body cultivating economic development and providing a voice for the Cayman Islands’ Digital Sector. This ensures the integration of existing business infrastructure such as the Cayman Islands’ regulatory and taxation environment with Brac Informatics Centre, the authorized data centre partner and provider of cloud services.

Considerations before Cayman Islands Free Trade Zones business registration

Lack in strategic synergy and difficulty in securing a license to operate for non-related businesses

• The focus of the Cayman Enterprise City is limited to these specific cities and parks: Cayman Tech City, Cayman Commodities & Derivatives City, and Cayman Maritime & Aviation City, with the Cayman Tech City being further segmented into Cayman Internet Park, Cayman Media Park and Cayman Science & Technology Park. Therefore, the City would naturally prefer companies that are actively operating or are intending to do so in sectors with strong synergies to the existing companies within these cities and parks. These key sectors are Internet & Technology, Media & Marketing, Commodities & Derivatives, Biotechnology, Life Sciences and Green Technology and Maritime Services and Aviation Services.

• Therefore, if your business does not operate in these sectors, it might be hard for you to secure a license to operate. Even if you do, you will only be able to benefit from any additional strategic synergies, making it inefficient for you to force fit your business into operating from the Cayman Enterprise City.

Cayman Islands reputation as a tax haven

• Despite their inclusion in the February 2020 European Union tax haven blacklist, they have since been removed as of the October 2020 iteration. However, this was a decision met with much flak by many international watchdogs and governments, including Oxfam’s EU tax policy advisor and the Chief Executive of the Tax Justice Network. Regardless of their official classification, it is clear that the Islands are heavily associated with tax havens and financial secrecy.

• This is seen by its 2^nd place ranking on the 2021 edition of The Tax Justice Network’s Corporate Tax Haven Index, and its 1^st place ranking on the 2020 edition of their Financial Secrecy Index. As we can see, The Cayman Islands are definitely one of the more notorious tax and have even been labelled as a “tax scam” by then President of the United States, Barack Obama in a 2016 statement.

• This reputation as a tax haven might lead to additional scrutiny on your business by tax and banking authorities, which might lead to refusals to onboard your business, or added compliancy costs. This loss of reputation might even extend to your supplier and customer base that values credibility and trust heavily, leading to them being hesitant in business dealings with your business.

• These effects might be mitigated with the implementation of The International Tax Co-operation (Economic Substance) Law 2018 that builds upon the OECD’s Forum on Harmful Tax Practices to deliver an economic substance test that is to be met by certain business entities to evaluate its legitimacy. Ultimately, you should weigh the effects of associations with tax havens with the benefits of incorporating in the Cayman Enterprise City to decide how to best fulfil your business goals and objectives.

• Tetra Consultants also offers business consultancy services that will advise you how to structure your business to best do so.

Looking to set up a Cayman Islands Free Trade Zones business?

• Contact us if you have any enquiry regarding how to register business in Cayman Islands Enterprise City and open a corporate bank account for your business. Our team of experts will revert within the next 24 hours.

FAQ

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Is there a minimum capital requirement to incorporate my Special Economic Zone business?

Can I qualify for the Cayman Enterprise City as a sole proprietorship?

Can I convert an existing incorporated enterprise into a Special Economic Zone business?

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