Fun Facts about Offshore Tax

If you have made it this far (i.e. beyond the title), thank you for persevering and being optimistic enough and/or loving me enough to read a page about tax laws. I had originally intended to post this last weekend but after the debacle that was Brexit I figured the world needed a week off. I promise that in return for your faith in me, I will make this offshore tax snapshot informative and witty and if you make it all the way to the end of the page, there'll be a picture of a cute teacup pig doing ballet as a reward.

I thought I would write this page as "what's the tax situation over there?" was one of the most common questions people asked me when I said I was moving to the Cayman Islands, after "so you're going to help rich people hide their money from the government, hey?" (As an aside - no I don't - I more often help track it down and return it to investors, so I'm really the Robin Hood / Sherlock Holmes / Wonder Woman of the offshore financial market - you're welcome, world).

There is some disagreement among historians about how the Cayman Islands came to be a tax neutral jurisdiction. Some say that it is because 10 British ships were shipwrecked on the island in 1794 and as a thank you to the Caymanian people for saving those aboard, who included a Prince, King George III decreed that the people of the Cayman Islands would forever be free from tax and conscription. Others say it is because before the airport was built in 1952, there were so few companies and incomes were so insignificant that it was not worth imposing any form of direct taxation.

I prefer the first story obviously but I suspect it was more likely the latter. Either way, I'm keeping an eye out for shipwrecked princes in case there are grateful decrees to be bequeathed from the motherland (perhaps along the lines of....thou shalt have no further HECS debt).

As a result, there is currently no income, inheritance, sales, corporation, capital gains or property taxes in the Cayman Islands.

Tax Haven v Tax Neutral Jurisdiction

Much like "Donald Trump" and "vehicular manslaughter", the term "tax haven" has some justifiable negative connotations. You hear "tax haven" and you think of a low visibility jurisdiction, with minimal financial disclosure obligations and an uncooperative approach to global tax obligations.

However, contrary to popular assumptions, the Cayman Islands are actually one of the more transparent nations in the world when it comes to financial information sharing (please note how protective I have become of my new home a mere 5 weeks in). Since 2000, the Cayman Islands have been a member of the Global Forum on Taxation (now, that sounds like a thrilling annual conference!) and signed up to the OECD's project to eliminate harmful tax practices. Cayman has had a tax information exchange agreement in place with the USA since 2001, has also long been reporting interest income earned by EU citizens in Cayman Islands bank accounts to the 28 EU states who are members of the European Union Savings Directive and has tax information exchange agreements in place with some 35 countries.

In contrast, one of the biggest tax havens in the world is actually the USA (gasp!). While the US imposes disclosure obligations on everyone else, it hasn't signed up for any of the international reporting standards and its own reporting legislation - FATCA - which requires countries to report to the IRS accounts owned by American citizens, is unsurprisingly unilateral. States like Nevada, Delaware and South Dakota enable you to set up a shell corporation with the flick of a pen and the US as a whole has the laxest regulations for setting up shell companies of anywhere other than Kenya (who admittedly, probably have priorities more urgent than stringent financial management and reporting). Meanwhile here in Cayman, the financial regulations, anti-money laundering legislation and various other regulations made opening a bank account here the hardest thing I've ever had to accomplish in my life so far.

All this is basically a long-winded way of saying - lay off, guys - unlike shady Delaware**, our banking and tax practices are as transparent as the crystal clear Caribbean water we get to swim in each day!

Duty

While there is no direct taxation in the Cayman Islands, one particular inconvenience given our proximity to the USA (the missed online shopping possibilities!) is the import duty. It can be a killer.

Import duty of 10 to 25% can be imposed on goods imported into the country. Most mail order items are hit with a 22% duty, including gifts from family and friends! I have a horrible suspicion that this means my birthday next year is going to be very expensive for me. Clothing and electronics also have a 22% duty and cars are between 29.5% and 42% depending on the model and value. Devastatingly, there is also a CI$3.60 duty charge for every bottle of wine brought into the country. The one saving grace is that books are exempt! Amazon, here I come.

The short point is, my online shopping dreams (and yours, if you were hoping to use me as a PO Box for US online shopping) are dead. To the many of you who have numerous gifts to send me, don't bother, because I'll have to pay the duty at this end. From stories I've heard, customs often has difficulty calculating 22% of the value of goods and in those circumstances, picks a number based on the "vibe" of the package, which may well exceed the value of the goods themselves!

And that, dear friends, is my pithy summary of Cayman Islands tax issues. Probably wildly incorrect, offensive to Americans and the most boring tropical island blog post you've ever read, so here is your promised teacup pig. You're welcome.

** The writer has never actually been to Delaware and is sure it's a delightful, if slightly lacking in stringent financial regulation, place to live, work and visit.

Flowers Sea Swim

I participated in my first Island community activity last weekend in the form of the annual Flowers Sea Swim!

Now, this is not an event that involves swimming through an ocean strewn with petals, as one friend thought, but an annual charity fundraiser organised by the Flowers family. Frank Flowers started the swim 24 years ago as a way to increase participation in open water swimming, raise funds for charity and create an event for everyone to participate in, from kids to Olympic swimmers. This year the swim was supporting the Cayman Cancer Foundation and it was particularly poignant as Eve Flowers, the matriarch of the family, had passed away earlier this year from cancer.

And so it was that Mel and I donned our yellow caps on Saturday afternoon to swim 1 mile along the shore line with 1100 of our closest Cayman friends. We had to fight for our caps, however, as we almost missed the registration cutoff thanks to a car breakdown. We weren't overly concerned as nothing on this Island has ever started on time in our experience so far, and we assumed the swim would be no different. Alas, it seems that the Flowers Sea Swim is the one activity on Island that is run with a strictness that would make an army drill sergeant's eyes water. But thanks to some sweet talking, begging, sob stories or more likely simply exhausting the volunteer who had better things to do, we were given our caps and numbers.

At this point, we gratefully splashed into the water to escape the oppressive heat on the sand and I came face to face with one of my new supervising partners. If anyone is looking to break the ice with a work superior, run into them in a bikini at the end of week 2 in the office - that'll do it, trust me. (In all honesty though, he is lovely and was there doing the swim with his 9 year old son, who Mel threatened to drown if it looked like he was going to overtake us).

After the race, some people said they saw a turtle or stingrays underneath when they were swimming. I must have missed these while I was trying not to drown. I had done 1 practice run of the distance (OK, fine not the full distance as I had got bored walking down the beach) and knew I could finish if I paced myself. But it turns out 1 mile is a REALLY long way! I have done 1km ocean swims before and thought "easy peasy, mile/kilometre, same same." No. They're really not. 1 Mile is closer to TWO kilometres than one. AND we had to swim AGAINST the current (my practice run was in the opposite direction with the current because I don't hate myself). The result of this confluence of factors is that I resisted looking up to see where I was for what felt like forever, because I didn't want to look up until I was close to the finish and when I did finally glance up after what felt like an hour of swimming, the finish line was obviously nowhere in sight. When it did eventually appear, I somehow didn't manage to get any closer to it for a weirdly long time. I am sure they kept moving it along the beach.

However, spoiler alert, I didn't drown and did make it through the darn finish line in 43 minutes and placed 521 of 1100 #crushedit. I scored a water bottle, T-shirt, towel and random other goodies for my trouble. After laying down on the floor of my air conditioned apartment for a while to confirm I wasn't going to die (it sure felt like it - I probably shouldn't have done hot yoga and paddle boarding that morning), it was pina colada and prizes time!

The other reason the Flowers Sea Swim is so awesome is that they have the best prizes of any competition like this, ever (I have no authority for this statement but it simply must be true). There are about 150 prizes on offer for swimmers, meaning there is a 1 in 7 chance of winning, and the prizes include amazing things like flights to New York, Chicago, London, Paris, Havana, money, phones, dinner vouchers, holiday vouchers, petrol vouchers and other random gifts. Devastatingly, neither I nor any of my friends there that day won any prizes. There were also more than 7 of us so statistically, I am a little suspicious.....

Nevertheless, it was a fantastic day and an excellent item to check off my island to-do list in only week two!

Hello Grand Cayman

As you may have noticed from my shameless social media bragging over the last fortnight, I eventually made it to the Cayman Islands after the longest visa processing delay in global immigration history (well, that's what it felt like).

After a three month wait for my visa, on 27 May 2016 I finally departed Australian soil and set out for the Caribbean. So how, I hear you ask, did I even get here? Well that, unfortunately for you dear reader, is a 30 hour story.

Tragically for Australians, while there are a surprising number of cities in the US with direct flights to Grand Cayman, none of those are cities to which you can fly directly from Sydney. If you are in the market for a stop over from the US, you'll be pleased to know you can get to Grand Cayman from Miami (1.5 hours), New York (4 hours), Houston (2 hours, 15 minutes) and Chicago (3 hours, 15 minutes) among several others. However, en route from Sydney one must find a way to one of these airports from LA, San Francisco or Dallas. For a brief few months of the year, you can fly direct from Dallas to Grand Cayman, however those flight times in no way line up conveniently with the arrival times of the Sydney > Dallas flight.

The easiest route from Sydney is Sydney > LAX > Miami > Grand Cayman.

You get a thrilling layover in LA where you have to collect your baggage, clear customs and check your bags back in again at the transfer desk (whoever thought putting the baggage transfer desk at THE TOP of a steep ramp is nothing short of sadistic - my trolley loaded high with 4 suitcases almost took me back down with it), then sprint to the next terminal over to go back through security in an unrealistically small time frame and hope your visa paperwork is in order so they let you on the plane.

Needless to say, by the time I landed in Grand Cayman (after the Miami flight was changed to a different plane, which was then stuck on the tarmac for 2 hours), I was a mere Gem-shaped shell dragging my suitcases behind me.

However after all of that, things started to look up as I was met at the airport by two colleagues who promptly whisked me away for welcome cocktails!

So, now that you all know how to come and visit me, please form an orderly queue here....