The tax climate around the world appears to be one which squeezes taxpayers to the point where offshore is becoming an increasingly attractive alternative for many. As tax obligations continue to increase in countries such as the U.S. and the U.K., the public, now more than ever, is looking at offshore as a sensible place where tax advantages can be utilized.
Companies and individuals need such opportunities to remain globally competitive, so they can still provide labor within their country of origin and compete with the likes of China, India and, in the future, Africa, for labor costs.
Governments motivate public to move offshore
It’s not just the fact that those in high tax countries must pay ever increasing sums to the tax man that encourages them to look offshore, but often the tax payers’ disagreement with how their governments spend those tax dollars and where those who generate much of the country’s income have increasingly less of a say on how the tax dollars are spent. I use the United States as an example, as it is the closest to us, but the same is true of many other onshore countries the world over.
Onshore double standards
While U.S. regulatory bodies put continual pressure on offshore countries to comply with their demands on so called ‘transparency,’ at the same time the United States offers huge tax incentives and breaks for inward investment to its country.
This even extends state versus state, whereby individual states offer big incentives to lure business away from other states. A case in point is the tremendous success of southern states like South Carolina wooing the automobile industry away from the traditional hubs of Detroit and Chicago, which have since out-priced themselves. In 2013, the Michigan-based Automotive Industry Action Group said that industry forecasts showed that automotive production in the south was expected to grow by as much as 85 percent over the next three years.
Cayman real estate tax advantages
While some view investing or residing in the Cayman Islands as cheating on taxes, perhaps they need to keep in mind that the Cayman Islands is by no means ‘tax free.’ Taxes or streams of government revenue such as import and customs duties, stamp duties on real estate purchases, work permit fees, licenses and other company fees, in essence create a consumption based/luxury tax system, resulting in a very real 25 to 30 percent tax rate for Cayman Islands residents.
From a real estate perspective, besides investing with the goal of property appreciation or simply for the enjoyment of a beautiful vacation home, there are tax advantages that make investing in Cayman Islands property extremely attractive.
With no annual property taxes, inheritance or capital gains taxes, the Islands offer incentives to purchase real estate that few other locations can offer. In the United States, for example, property tax is charged annually based on a property valuation which is also re-valued every five years or so, whereas in the Cayman Islands a one-off stamp duty of 7.5 percent, charged at the time of purchase is the only government duty charged for the time that one owns the property, making it a financially sound option, particularly if you intend to own the property for a good many years and spread this cost over a longer period of time. So there will never be any unexpected tax expenses when purchasing property in the Cayman Islands.
In addition, there are no restrictions on property ownership, unlike competitor jurisdictions where a purchaser is charged a significant fee to obtain a licence to purchase property. Overseas buyers are free to purchase property or land in the Cayman Islands just the same way as a local resident, from whoever owns it.
Cayman stands ready to welcome new residents
In the Cayman Islands, real estate and development is the third pillar of our economy behind the financial services industry and tourism and in the last year or so we have seen exciting new growth within the residential market place, with new hotels, private residences and subdivisions pumping fresh money into the industry and thereby into the country as a whole. And with onshore countries putting an increasing level of tax pressure on the public, I believe places such as Cayman are becoming ever more attractive for people not just to invest, but to retire and live.
While Cayman might not be as cost effective for some to make the jurisdiction their retirement home – places such as Panama are much cheaper for Americans, for example, and are becoming increasingly popular with retirees – the island does attract the affluent buyer looking for an upscale retirement home in a safe and secure tropical environment with a rich social and multi-cultural lifestyle.
Infrastructure for such purposes is on a par with what they would find in their home country, with up to date telecommunication services, an abundance of air transportation services with routes around the world, and now additional health services and expanded areas of care with Health City Cayman Islands fully functioning and set to be one of the finest healthcare providers on this side of the world.
In conclusion, the Cayman Islands can offer a real and tangible option to onshore tax woes, within a safe and secure environment that offers all the services of onshore countries within a tax neutral environment.