As one of the foremost offshore financial centres, home to approximately 70% of the world’s offshore investment funds and with an absence of any direct taxation on companies or individuals, the Cayman Islands has become an attractive destination for technology entrepreneurs. While much of Cayman’s financial services legislation was written before the recent blockchain revolution began, the last few years have seen the Cayman Islands take a number of legal and regulatory steps to make the Islands a jurisdiction that will allow such innovation to thrive. Cayman’s ambition to become a global technology hub is also supported by a sound legal framework, a wealth of experienced professional service providers, modern infrastructure, state-of-the-art communication systems and a stable political climate.

Cayman’s flexible business-oriented legislation, multitude of potential issuer vehicle types, political stability and internationally recognised securities regulatory regime has enabled the Islands to pivot away from crowdfunded platforms towards security tokens and stablecoins which provide greater value stability and more predictable investment returns. This same flexibility means that Cayman has been able to take advantage of the shift towards securitising common assets and decentralised finance (DeFi) products, with Cayman already being the offshore centre of choice for other securitisation issuers. Recent years have also seen Cayman’s foundation company becoming a popular choice for projects looking for a flexible governance entity to provide a legal wrapper for their DAO or other community-led initiatives.

Framework legislation regulating virtual asset service providers came into force on 31 October 2020 and has already attracted a number of new entrants to the Cayman market. A technology-neutral regulatory sandbox is awaited and it is hoped this will further attract companies operating in this fast-moving sector to establish themselves in Cayman.

First amongst the leading offshore jurisdictions, Cayman established a technology park within its existing special economic zone (SEZ) to allow technology companies to benefit from specific advantages, including zero-taxes and fast-tracked work permit applications for relocating employees.
The pressures created by the COVID-19 outbreak on global trade systems highlighted the urgent need to maintain and strengthen the resilience of international supply chains. This resilience depends on trust, transparency and integrity, which can be improved through the responsible deployment of blockchain technologies. With applications to join the technology park within the SEZ at an all-time high, it is anticipated that Cayman will continue to benefit from technology companies looking to respond to this shift and establish themselves in a tax neutral jurisdiction.

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1. Are there any “sandbox” or other regulatory neutral zones?

The Virtual Asset (Service Providers) Act 2020, as revised (VASP Act) introduced the concept of a sandbox with a view to providing the Cayman Islands Monetary Authority (CIMA) with the opportunity to regulate, on a lighter-touch basis, businesses that utilise innovative technologies or are engaged in activities that have the potential to benefit the financial services industry in the Cayman Islands. The aim of the sandbox is to encourage, foster and incubate companies operating in this fast-moving sector. Unfortunately, a date for the sandbox to open is still awaited.

2. Is there a Digital “incubator” or hub?

The Cayman Islands government has established the SEZ, which enables technology companies from outside Cayman to easily and cost-effectively set up and operate offshore with a genuine physical presence.

Benefits of being a resident in the SEZ include:

  • No corporate, income, sales or capital gains tax;
  • Fast-track set up in 4-6 weeks;
  • Renewable 5 year work/residency visas granted in 5 days for staff from outside the Cayman Islands;
  • No Government reporting or filing requirements;
  • Presence in a tech cluster with cross-marketing opportunities;

3. Are there any barriers to entry for foreign technology companies?

There are special limitations, requirements and barriers to entry for foreign companies. Companies incorporated in the Cayman Islands fall into two principal categories: companies formed to trade primarily in the Cayman Islands and companies incorporated for the purpose of conducting business outside the Cayman Islands. Technology companies seeking to carry on business within the local Cayman Islands market will be required to have certain levels of local ownership and participation, or an exemption from such requirements.

4. Have traditional institutions embraced new technologies?

New technologies have not yet displaced traditional financial service providers in Cayman. Cayman Finance, a group that represents Cayman’s financial services sector has established an innovation lab to engage with the financial services industry, regulators, the government and the media to promote the development and use of new technologies on the Islands.

A number of service providers have adopted technologies to enable the onboarding of clients and the collection of know-your-client (KYC) documents digitally.

Informal conversations have also started concerning a potential framework of laws, developed under Cayman Finance and CIMA that might direct new technologies towards the institutional market.

6. What AML requirements apply to businesses in Cayman?

The Cayman Islands has long been committed to implementing best international practices and is compliant with the anti-money laundering and anti-terrorist financing requirements of the Organisation for Economic Co-operation and Development (OECD) and Financial Action Task Force (FATF). As a member of the Caribbean FATF, the Cayman Islands implements recommendations promulgated by the FATF.

All Cayman Islands incorporated entities are subject to the Proceeds of Crime Act (as revised) which sets out the principal money laundering offences. Certain ‘relevant’ businesses (which would include, for instance, entities caught within Cayman financial services regulations, including VASPs and those registered or licensed under SIBA, and other entities thought to be at a higher risk of money laundering) are further subject to the Anti-Money Laundering Regulations (as revised) which prescribe certain identification, record keeping and internal control procedures for such businesses.

Importantly, businesses in the Cayman Islands need to adopt a risk-based approach to the collection of know-your-client (KYC) information. Under the risk-based approach, the latest guidelines from the FATF permit the digital verification of identities and receipt of electronic copies of documents instead of traditional “wet ink” paper-based processes.

7. Are electronic signatures valid?

The Electronic Transactions Act (ETA) generally puts electronic signatures on an equal footing with “wet ink” signatures in the Cayman Islands.

Technologically neutral, the ETL was established to promote public confidence in the validity, integrity and reliability of conducting transactions electronically and recognises electronic records as records created, stored, generated, received or communicated by electronic means.

8. How is personal data protected?

Cayman’s Data Protection Act (DPA) came into full force in 2019.  Drafted around a set of EU-style data protection principles to which data controllers must adhere, personal data must be collected in a fair and transparent manner and only be used and disclosed for purposes properly understood and agreed to by data subjects. Any personal data collected must be adequate, kept up-to-date and should not be retained for longer than is necessary to fulfil the collection purpose.

The DPA introduces globally recognised principles about the use of personal data to the Cayman Islands. The DPA aligns the Cayman Islands with other major jurisdictions around the world, notably the EU, and thereby facilitates the free flow of data – a prerequisite for the Cayman Islands being an equal and competitive participant in today’s globalised economy.

Importantly, the DPA provides a standard framework for both public and private entities in the management of the personal data they use. Internationally active organisations will find many similarities between the data protection law of the Cayman Islands and those of other jurisdictions where they are active. The DPA aims to reduce the administrative burden of operating internationally and cement the Cayman Islands as an attractive jurisdiction in line with international developments.

The Office of the Ombudsman is the Cayman Islands’ supervisory authority for data protection.

9. Are smart contracts enforceable in the Cayman Islands?

There are no laws, regulations or Cayman judicial decisions addressing the enforceability of smart contracts.

Provided that the defining features of a contract are present – offer, acceptance, the intention to be legally bound and consideration – smart contracts are capable of satisfying the requirements for a binding contract and are enforceable by the courts.

Arguably the role of contractual interpretation for smart contracts written wholly in computer code may be limited as the language (in this case code) will typically be clear and unambiguous, although issues may arise where the code is ill-defined.

With the regard to the developer liability, although the point remains untested in Cayman, the authors’ view is that developers of blockchain protocols are not fiduciaries. The role played by protocol developers in the governance of public blockchain networks does not pose the risks of abuse that characterise traditional legal fiduciaries and therefore does not require the imposition of fiduciary duties.

It should also be borne in mind that the risk of developer abuse in a publicly governed blockchain is minimal. By its nature, each update to the open-sourced code is analysed and tested by other network participants who have a significant economic interest and the technical abilities to audit the code before implementing it.


1.  How are virtual assets regulated?

In May 2020, a new legislative framework for regulating virtual asset businesses, the VASP Act, was introduced in the Cayman Islands. Phase one of the VASP Act came into force on 31 October 2020. Phase two is awaited.

The VASP Act is intended to provide a flexible framework to promote the use of new technology and innovative enterprise in the Cayman Islands while complying with newly adopted international standards set by the FATF. The new legislation provides for the supervision of persons and entities facilitating virtual asset activities as a business.

The VASP Act defines virtual assets as “a digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes but does not include a digital representation of fiat currencies“. This wide definition captures all cryptocurrencies, security tokens, utility tokens or other digital assets that are tradeable or transferable, with the exception of digital fiat currencies. The “digital expression of fiat currencies” is not defined but is intended to apply only to government-issued virtual currencies as opposed to Tether or similar currency backed tokens.

The VASP Act applies to any person providing “virtual asset services“. Virtual asset services are defined as the issuance of virtual assets or the business of providing one or more of the following services or operations for or on behalf of a natural or legal person or legal arrangement:

(a) exchange between virtual assets and fiat currencies;

(b) exchange between one or more other forms of convertible virtual assets;

(c) transfer of virtual assets;

(d) virtual asset custody service; or

(e) participation in, and provision of, financial services related to a virtual asset issuance or the sale of a virtual asset.

The VASP Law will only affect persons that carry out virtual asset services as a business or in the course of a business for or on behalf of other persons.

The regulatory framework for the VASP Law will be implemented in two phases. Phase one will focus on anti-money laundering and countering the financing of terrorism compliance, supervision and enforcement, and other key areas of risk. Under phase one, entities engaged in or wishing to engage in virtual asset services must be registered with CIMA under the VASP Law. Entities engaged in or wishing to engage in virtual asset services, already subject to CIMA’s supervision under another regulatory law, must notify (in the case of licensees) or register (in the case of registrants) with CIMA under the VASP Law.

Phase one (registration or notification) targeted three groups:

1. Entities wishing to perform virtual asset services for the first time;

2. Entities providing virtual asset services prior to the commencement of the VASP Act; and

3. Existing CIMA licensees that provide or propose to provide virtual asset services

The VASP Act provides for various exceptions including:

  • platforms which are mere meeting places where sellers and buyers may post bids and offers and where the parties trade in a peer-to-peer environment only;
  • fintech service providers that use innovative technology to improve, change or enhance financial services but which are not virtual asset services; and
  • virtual service tokens which are not transferable or exchangeable and include tokens whose sole function is to provide access to an application or service.

2. Are virtual assets subject to the local AML regime?

Yes. Virtual assets are deemed to be at a higher risk of money laundering and so would be subject to the higher AML threshold under the Anti-Money Laundering Regulations. The VASP Act is AML driven and adopts the same standard.

All Cayman Islands incorporated entities are subject to the Proceeds of Crime Act which sets out the principal money laundering offences. Importantly, businesses in the Cayman Islands need to adopt a risk-based approach to the collection of KYC. Under the risk-based approach, the latest guidelines from the FATF permit the digital verification of identities and receipt of electronic copies of documents instead of traditional “wet ink” paper-based processes.

3. Is a physical presence required in the Cayman Islands to conduct a virtual asset sale?

Potentially. The Cayman Islands introduced economic substance requirements in 2019 which impact certain entities conducting relevant activities. See section F below.

Under the VASP Law, the “issuance of virtual assets” means the sale of newly created virtual assets to the public in or from within the Cayman Islands in exchange for fiat currency, other virtual assets or other consideration. It does not include the sale of virtual service tokens. A virtual service token is a digital representation of value which is not transferrable or exchangeable with a third party at any time and includes digital tokens whose sole function is to provide access to an application or service or to provide a service or function directly to its owner.

The term “public” is not defined, but we consider that limited private sales to owners, affiliates and employees are not likely to be within scope. As the definition is limited to sales, we consider that airdrops or similar for-free allocations of virtual assets are out of scope.

Persons wishing to issue virtual assets from the Cayman Islands must first register with the Cayman Islands Monetary Authority (CIMA) as discussed further below. Once registered, and prior to issuance, they must then submit a request to CIMA for the approval of a virtual asset issuance and the issuance must not exceed a prescribed threshold (yet to be announced) that will be an amount in fiat currency that can be raised by an issuer within a given timeframe. Issuers that intend to raise funds over the prescribed threshold will be required to conduct the sale through a licensed virtual asset trading platform (see C1 below).

4. Are gambling platforms permitted?

No. Cayman entities cannot be engaged in, or operating as, an online or offline gambling or gaming company or platform.

It is also an offence to sell, offer for sale or gift any ticket or token that provides access to gambling or gaming activities. This would likely preclude a token sale where the token could be used to access, or act as a medium of exchange on, a gambling platform.

5. Can decentralised-finance (DeFi) products be launched from Cayman?

Yes. Decentralised Finance refers to a technology set that aims to replicate and innovate on current financial services models/products using blockchain technology. These financial services range from virtual assets that may or may not represent assets in the real world to financial smart contracts that can replicate derivative products found in traditional finance markets.

To date, the use of DeFi protocols is not regulated, except where they can be established to fall within existing regulation.

In addition to the requirements of the VASP Act, the primary piece of legislation regarding securities and investment business in the Cayman Islands is the Securities Investment Business Act, as revised (SIBA). SIBA provides for the licensing and control of persons engaged in securities investment business in or from the Cayman Islands. Importantly, SIBL is essentially consumer protection legislation, designed to protect the investing public and to be construed broadly. When determining whether a business activity is caught by SIBA, therefore, the emphasis is on substance rather than form.

SIBL sets out an exhaustive list of financial instruments that constitute ‘securities’. In 2020 SIBA was amended and the definition of “securities” also now includes virtual assets which can be sold, traded or exchanged immediately or at any time in the future that:

(a) represent or can be converted into any of the securities listed under SIBA, or

(b) represent a derivative of any of the securities listed under SIBA.

Whether an asset could constitute a security under SIBA is a fact-specific enquiry dependent on the unique functionalities exhibited by the asset.  If the asset qualifies as a security, the issuer will be either dealing in, or arranging deals in, securities, although the issuer’s activities may fall within a list of excluded activities under SIBA.

6. Are non-fungible tokens regulated in the Cayman Islands?

There has been an explosion of interest around non-fungible tokens (NFTs) in the last 18 months. However, the introduction of the VASP Act has not led to a corresponding rise in offerings from the Cayman Islands as market participants and CIMA seek to determine whether NFTs are virtual assets and therefore whether activities related to NFTs require separate registration under the VASP Act.

It is clear that NFTs could open new revenue streams and are a source of earning potential for brands and many others in the “creator” economy. We expect interest in using Cayman as a launch pad for such opportunities will continue to grow as the regulatory landscape becomes clearer.

7. Can Decentralised Autonomous Organisations (DAOs) be established in the Cayman Islands?

Yes. Cayman is proving a popular choice for projects wishing to use a legal wrapper for their decentralised and community-driven projects. Combining the limited liability protections of a corporate entity with the flexibility of a trust, the Cayman foundation company provides DAO projects with a very user-friendly option.

For projects looking to issue virtual assets privately, the foundation company is also able to represent the DAO. The VASP Act only regulates the sale of virtual assets to the public. Private sales which are not advertised, and made available to a limited number of persons who are each selected prior to the sale by way of a private agreement, are outside of scope.

Projects that wish to decentralise immediately by carrying out an airdrop of tokens can also utilise a Cayman foundation company. The VASP Act is only concerned with “sales” of virtual assets in return for a cash or other crypto payment.

Where the DAO wishes to carry on VASP activities, one alternative is to create a wholly owned subsidiary of the foundation company in a virtual asset-friendly jurisdiction. The Cayman foundation company will then procure the subsidiary to carry on whichever activities it cannot perform from the Cayman Islands. Whilst this structure is more complex it allows projects to take full advantage of the benefits of the foundation company vehicle in a way that ensures compliance with the VASP Act.

DAO projects using Cayman structures have adopted a range of governance models with both one token/one wallet to one vote and weighted vote arrangements proving popular.

Cayman vehicles typically provide a legal wrapper for the community voting arrangements but also act as service providers to carry out the instructions of the token-holders following a vote.



1. Can a crypto-to-crypto exchange be established?

YYes, subject to the requirements of the VASP Act. “Virtual asset trading platforms” include any digital platforms that facilitate the exchange of virtual assets for a benefit (such as a fee or commission) and which either holds custody of or controls virtual assets on behalf of its clients to facilitate an exchange or which matches bids and sales. The VASP Act does not apply to platforms that only provide a forum where sellers and buyers may post bids or one where the parties trade peer-to-peer. The VASP Act also does not regulate businesses that exchange, trade or transfer virtual assets for and on behalf of themselves for their own benefit.

Once the VASP Act comes into force, businesses that operate or intend to operate a virtual asset trading platform will require a licence.

When considering a licence application CIMA takes into account the following (non-exhaustive) matters:

(a) the size, scope and complexity of the virtual asset service, underlying technology, method of delivery of the service and virtual asset utilised;

(b) the knowledge, expertise and experience of the applicant;

(c) AML procedures and data protection safeguards in place for the applicant;

(d) the similarity of the virtual asset service to activities under SIBL or any other regulatory laws;

(e) the risks that the virtual asset service may pose to existing clients, future clients, other licensees or to the financial system of the Cayman Islands;

(f) the net worth, capital reserves and financial stability of the applicant;

(g) the applicant’s ability to comply with the VASP Act and the relevant requirements of the AML Regulations; and

(h) whether the applicant’s senior officers and ultimate beneficial owners are fit and proper persons.

Persons registered or licensed under the VASP Act are subject to ongoing requirements. These include the registrant or licensee:

(a) undertaking audits of their AML systems and procedures at the request of CIMA;

(b) preparing audited accounts and submitting those to CIMA annually;

(c) making sure its senior officers and beneficial owners are fit and proper persons;

(d) obtaining prior approval from CIMA to appoint senior officers or AML compliance officers;

(e) providing certain notices to CIMA confirming their compliance with the AML Regulations and DPA, and ensuring that all communications relating to the virtual asset service are accurate;

(f) designating an employee as the officer with responsibility for the procedures for combating money laundering, terrorist financing and proliferation financing; and

(g) obtaining prior approval from CIMA before issuing or transferring shares or other equity interests totalling 10% or more of the registrant or licensee.

2. Can a crypto-to-fiat exchange be established?

Yes, subject to the requirements of the VASP Act. See C1  above.

3. Is a money services licence required for crypto-to-fiat conversion through an OTC desk?

No, but such a provider would likely be considered a virtual assets service provider and would need to register with CIMA under the VASP Act.

4. Can a virtual asset project establish a local bank account?

Potentially, but local banks remain very cautious about accepting business where funds are derived from the sale of virtual assets.  It is recommended that the process of opening a bank account for virtual asset projects should be started as early as possible.

There is no general requirement for an entity to be registered in Cayman or have a physical presence in Cayman to establish a Cayman bank account although this decision is at the individual bank’s discretion.

There is also no requirement for a Cayman entity to have a Cayman bank account.

5. Can you register as a virtual asset custodian in the Cayman Islands?

Yes. Under the VASP Act, virtual asset custody services are defined as the business of safekeeping or administration of virtual assets or the instruments that enable the holder to exercise control over virtual assets. This definition is intended to capture all persons that hold or have access to, for or on behalf of other persons, the private keys or similar attributes that can control a virtual asset. This would include virtual wallet providers operating from the Cayman Islands.

Once in force, custodians will require a licence under the VASP Act. See C1 above for the licence application and ongoing licensing requirements.

6. Are VASPs subject to the local AML regime?

Yes. VASPs are deemed to be at a higher risk of money laundering and so would be subject to the higher AML threshold under the AML Regulations.

International best practice set out by the FATF call for VASPs to conduct full client due diligence for any one-off transaction above USD$1,000 or equivalent.

Regardless of the nature of the relationship or transaction, VASPs must have in place effective procedures to identify and verify the identity of a customer, including when establishing business relations with that customer.

7. How do Exchange, On-Ramps and Off-Ramps operate?

To the extent that cryptocurrencies can be both purchased with, and redeemed for, fiat currencies via a Cayman entity, such transmission is likely to fall within the VASP Act and potentially also within either the currency exchange or money transmission provisions of the Money Services Act and therefore require a licence.

8. Are Virtual Assets considered “Property”?

The point is untested in Cayman, but the Cayman courts would probably be persuaded by English court  rulings and the findings of the UK Jurisdiction Taskforce on the legal status of digital assets. As such, it is likely that digital assets would be treated as property in Cayman and, consequently, could be the subject of a fixed or floating charge. In order to ensure the effectiveness of any such charges, lenders should consider taking custody of digital keys.

9. Taking Security over Virtual Assets

Where tokens are held by obligors through a custodian or other agent, security could be taken over the rights that obligor has against that custodian or agent. An assignment of rights would likely be governed by the same governing law as the custody or agency agreement.

Where tokens represent underlying shares of a Cayman company or interests of a limited liability company (LLC), security would need to be taken in the Cayman Islands in the usual way that security is taken over the equity interests of such an entity type, which is typically by way of an equitable share mortgage or charge.

There is no general central registry in Cayman for the public registration of charges. However, Cayman companies and LLCs are required to maintain a register of mortgages and charges at their registered office in the Cayman Islands, and an LLC is required to maintain a register of security interests at its registered office in the Cayman Islands in which shall be registered any security interests taken over the interests of such an LLC.

10. Mining and Staking

There are currently no restrictions on the use of mining, however, given the high utility costs on the Islands, large-scale mining from within the Cayman Islands would likely not be viable.

There are currently no restrictions on the staking of tokens.


1. Are tokenised funds regulated in the Cayman Islands?

In a tokenised fund, an investor’s interest is represented by a cryptographic token, as opposed to shares or other interests or units offered to investors in a more traditional fund structure.

The primary piece of legislation in the Cayman Islands relating to open-ended investment funds is the Mutual Funds Act. A “mutual fund” is defined as a common investment vehicle which issues equity interests (such as tokens in a tokenised fund structure) that allows participation amongst a pool of investors in the profits or gains of such vehicle’s investments and which is redeemable at the option of the investor.

The definition of “equity interest” under the Mutual Funds Act has been amended to include “any other representation of an interest“. This amendment is broad enough to capture digital tokens or other virtual assets. Therefore, open-ended funds issuing redeemable tokens instead of shares or other equity interests are now covered by the Mutual Funds Act and will need to be registered or licensed under that law. In addition, the issuance of a native token by the fund would be caught by the VASP Act. See B1 above.

2. What service providers are required for a tokenised fund?

A tokenised fund needs to appoint: a board comprised of members, managers or directors (depending on the legal structure of the tokenised fund), an investment manager, an administrator, a custodian and legal advisers. In addition, a tokenised fund is likely to appoint a smart contract auditor and/or a third party KYC service provider to assist with the KYC process for subscribers.

All registered mutual funds must have their audited financial statements prepared or signed off by an approved Cayman Islands auditor and filed with CIMA within six months of their financial year end.

A tokenised fund may also opt to appoint trading counterparties, a distributor and/or placement agents.

3. What AML/KYC is required for token holders?

Cayman’s AML legislation applies to any business conducting “relevant financial business”. Accordingly, a tokenised fund will need to receive KYC documentation on each subscriber and every transferee of the token. Each transferee will also need to agree to the subscription terms for the tokenised fund.

4. Is there a minimum investment amount?

For a registered mutual fund, CIMA requires that the initial minimum subscription per investor must be at least US$100,000 (or the currency equivalent thereof).

5. Can token holders redeem their tokens or transfer the tokens they hold?

Depending on the redemption rights, token holders may redeem their tokens for cash and/or payments in-kind (or a combination thereof) or transfer their tokens with the written consent of the board. The attraction for holders of these tokens is that they also have the potential to offer liquidity through an exchange.

In order for the tokens to be freely transferrable on an exchange, either the fund itself or the exchange would need to ensure that any potential transferee:

  • provides sufficient KYC documentation to comply with Cayman’s AML laws;
  • provides sufficient information to demonstrate that they are an eligible investor; and
  • agrees to the subscription terms for the fund.

Redemption of tokens by the fund would also potentially bring the fund entity into scope and require registration as a virtual asset service provider under the VASP Act. See B1 above.


1. Does the Cayman Islands impose economic substance requirements?

Under the International Tax Co-operation (Economic Substance) Act (ES Act), the economic substance test (ES Test) requires that a relevant entity conducting a relevant activity:

(a) conducts Cayman Islands core income generating activities (CIGA) in relation to that relevant activity;

(b) is directed and managed in an appropriate manner in the Cayman Islands in relation to that relevant activity; and

(c) having regard to the level of relevant income derived from the relevant activity carried out in the Cayman Islands

(i) has an adequate amount of operating expenditure incurred in the Cayman Islands;

(ii) has an adequate physical presence (including maintaining a place of business or plant, property and equipment) in the Cayman Islands; and

(iii) has an adequate number of full-time employees or other personnel with appropriate qualifications in the Cayman Islands.

“Relevant activities” under the ES Law includes each of the following:

(a) banking business;
(b) distribution and service centre business;
(c) financing and leasing business;
(d) fund management business;
(e) headquarters business;
(f) holding company business;
(g) insurance business;
(h) intellectual property business; and
(i) shipping business;

but does not include investment fund business.

2. Are there any reporting requirements in connection with economic substance?

Yes. All entities are required to make an ES notification filing.

In addition to making a notification filing, relevant entities carrying on relevant activities must prepare and submit to the Cayman Islands Tax Information Authority (TIA) a report, so that the TIA may determine whether the ES Test has been satisfied in relation to that relevant activity.  The report is due within 12 months after the last day of each financial year.

A relevant entity that carries on a relevant activity but which has no “relevant income” is not obliged to meet the requirements of the ES Test.  That relevant entity will still, however, be required to satisfy its notification and reporting obligations under the ES Act (e.g. the report filed will be akin to a ‘nil’ return).

“Relevant income”, in relation to an entity, means all of that entity’s gross income from its relevant activities and recorded in its books and records under applicable accounting standards.

3. What penalty provisions apply in the case of non-compliance?

Penalties would be levied if an entity that is required to satisfy an ES Test fails to do so. The entity may be subject to an initial penalty of CI$10,000 (US$12,195) and in a subsequent year CI$100,000 (US$121,951). Failure to file a report carries a penalty of CI$5,000 (US$6,098) plus CI$500 (US$610) for each additional day the default continues.

It is an offence for a person to knowingly or wilfully supply false or misleading information to the TIA under the ES Act.  Such an offence is punishable on summary conviction by a fine of CI$10,000 (US$12,195) or with imprisonment for a term of five years, or both.

Where an offence under the ES Act has been committed by a body corporate, the officer or any person purporting to act in that capacity, as well as the body corporate, commits that offence.  Where the affairs of a body corporate are managed by its members, the foregoing shall apply in relation to defaults of a member in connection with the member’s functions of management as if the member was a director of the body corporate.


The Cayman Islands is a common law jurisdiction that has a robust intellectual property protection regime.

2. Trade Marks

The main IP rights available to protect branding are registered and unregistered trade and service marks. Technology companies will generally own a combination of an established brand or trade name — and this can include logos or icons — protected as registered or unregistered trademarks.

Trade mark rights give registered owners the right to prevent others using identical or confusingly similar marks to their registered mark. Brand owners can also rely on unregistered trade mark rights through the law of passing off. This allows the owner to prevent others from damaging their goodwill with customers by using branding or get-up that is identical or confusingly similar to its own.

3. Patents

Patents and industrial designs registered in the UK or at the European level can also be protected in the Cayman Islands by extension with the Cayman Islands Register of Patents and Trademarks. In addition, the patent regime has been amended to provide innovators with additional protections against abusive challenges to their rights by entities that obtain patents for the sole purpose of taking legal action against those who innovate and develop new products. The Cayman Islands patent laws have been amended to prohibit bad faith infringement claims by so-called patent trolls.

4. Trade Secrets

Trade secrets are protected in the Cayman Islands through a combination of common law and rules of equity. A range of remedies are available where trade secrets have been improperly acquired, disclosed or used.

Confidential information is protected through a contractual agreement to keep certain information confidential or through the common law obligation to keep information confidential, because of the nature of the relationship between the discloser and disclosee, the nature of the communication or the nature of the information itself.


1. Trade Licences

A Trade and Business Licence is a licence issued by the Trade and Business Licensing Board which allows a person / company to ‘carry on business’ in the Cayman Islands. It is required by anyone who wishes to ‘carry on business’ in the Cayman Islands. Depending on the nature of the proposed business, approval may be needed from other Government Departments.

Generally, no Trade and Business Licence is required for companies who wish to be incorporated within the Cayman Islands but without any physical presence or operations within the jurisdiction. Separate rules apply for companies establishing themselves in the SEZ (see section A.3 above).

2. Tax Matters

The Cayman Islands is a tax-neutral jurisdiction. There is no income tax, wealth tax, profits tax, capital gains tax, payroll tax, social security contribution (aside from mandatory pension contributions for employers and their employees) or corporate tax in the Cayman Islands. A registered Cayman Islands entity is not subject to any direct taxes. There may be tax implications for beneficial owners in their own jurisdiction, however.

3. Visas and Work Permits

All non-Caymanians employed in the private sector must have a work permit. An application for a full permit usually takes four to six weeks to process. A streamlined regime exists for certain types of businesses that can be set up within the SEZ (see section A.3 above).

Permit costs vary depending on the sector (financial services, tourism or construction), and the skill level of employees. The costs range from an annual minimum of KY$300 for unskilled workers to in excess of KY$30,000 for certain senior management and professional roles. Employers are responsible for work permit fees and these must not be passed on to employees.

Permits are ordinarily renewable for a maximum of nine years. An employee can make an application for permanent residency when he has been in the Islands for a continuous period of eight years, and these applications are determined under a points-based system which examines various economic and social criteria.

For most categories of employee, the employer must pay the premium under a health insurance contract issued by an approved insurer. However, the employer can recover up to 50% from the employee. Employers and eligible employees make mandatory contributions towards each employee’s pension plan of 5% of the basic salary up to the maximum prescribed level of pensionable earnings.



5. Global Citizen Concierge Program

In October 2020 the Cayman Islands introduced its Global Citizen Concierge Program. “Global Citizen” refers to a person who is employed outside of the Cayman Islands and intends to continue working remotely for his/her employer while residing in Cayman. The program is aimed squarely at attracting digital nomads.

A person who meets the criteria may make application to the Department of Workforce Opportunities and Residency Cayman (WORC) for a Global Citizen Certificate. The Cayman Islands Government has extended the program to 30 November 2024. To qualify, a person must:

(a) be employed outside the Cayman Islands and intend to remain so employed if a Global Citizen Certificate is granted;

(b) provide evidence that he/she earns no less than the following minimum annual income:

(i) applicant: US$100,000
(ii) applicant and spouse/civil partner: US$150,000
(iii) applicant and spouse/civil partner and dependent child or children: US$180,000
(iv) applicant and dependent child/children: US$180,000; and
(c) provide evidence that the income is generated outside of the Cayman Islands.

The successful applicant may have a dependant or dependants accompany or join him/her in the Cayman Islands if named in the Global Citizen Certificate. A dependant who also wishes to work remotely from the jurisdiction shall make his/her own application for a Global Citizen Certificate.

Certain restrictions will apply to any successful applicant, including a prohibition against offering any goods or services to any person or entity locally; a prohibition against obtaining more than one Global Citizen Certificate; and a requirement to possess adequate health insurance for the duration of the Global Citizen Certificate.

On terminating the employment of a Global Citizen, the person’s employer is required to advise the WORC of the termination as soon as reasonably practicable (but no later than 30 days after the termination date), and the Global Citizen Certificate will automatically expire on the date of termination of employment. In addition, the WORC may revoke a Global Citizen Certificate in certain circumstances.

The annual fee for a Global Citizen Certificate for an applicant and one dependant is KY$1,230. The annual fee for each dependant of any applicant (where there is more than one dependant) is KY$420.

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