3 There is no tax conflict or risk of double taxation in the case of cross-border commercial transactions concerning the tax-neutral jurisdiction of the Cayman Islands. Therefore, the removal of double taxation barriers, as in the case of DTTs, leads to increased foreign investment in developed and developing countries, better access to foreign technologies and capabilities, and benefits to local economies in these countries through increased foreign investment. The Cayman Islands, which had no taxes other than tariffs and stamp duty, have not, until recently, adopted double taxation agreements with other countries. However, it has limited tax agreements with the United Kingdom and New Zealand and signed a comprehensive tax agreement with Japan in 2010 (see below), in addition to several tax information exchange agreements that have ensured that jurisdiction is no longer on the “grey list” of OECD areas that have not significantly implemented the internationally agreed standard of tax transparency. This simple policy allows Cayman to achieve the same goal as countries that have double taxation conventions, but with similar or stronger safeguards against abuse. Cross-border economic transactions involving the fiscally neutral jurisdiction of the Cayman Islands do not require tax treaties, as there is no tax conflict or risk of double taxation. In addition, cross-border transactions between the Cayman Islands and other countries do not require tax treaties for mutual assistance (for example. B the ability to exchange tax information), given that the Cayman Islands have numerous bilateral tax information exchange agreements (TIEA) and the United Kingdom, through the United Kingdom, is subject to the multilateral convention on mutual assistance in tax matters. 6 Cayman cannot run the risk of double non-taxation because (i) it has no tax treaty and (ii) Cayman`s declared tax rate is exactly the rate applied. Double non-taxation is generally due to the application of provisions of a tax treaty to transfer the tax base from one country to a second country and to national tax policy in the second country (e.g.B. Exemptions, exemptions, tax rulings, credits, etc.) that drastically reduce the tax actually collected and withheld to an amount significantly less than the rate indicated by the second country to justify the deferral of the tax. [OECD Harmful Tax Practices – Peer Reviews; Inclusive Framework for BEPS – Action 5, Jul 2019] Cayman`s global tax neutrality regime is a hallmark among international financial centres (IFCs), many of which are investment centres for tax treaties with large double taxation networks.
The MoU is similar to other agreements between CIMA and foreign financial supervisory authorities. It describes the types of assistance that can be requested and provided by CIMA and the FSA. There are some situations in which tax treaties are more appropriate and others in which tax neutrality is more appropriate for dealing with double taxation issues, and the following situations are important to account for the potential benefits, risks and costs: the basic shift to tax evasion or prevention requires a legal mechanism – usually in the form of a double taxation agreement.