Taxation of international executives
Are there special residency considerations for short-term assignments?
The Cayman Islands does not have income tax and thus there is no domestic concept of residency for tax purposes.
Are there special payroll considerations for short-term assignments?
The Cayman Islands does not have income tax so income tax withholding does not apply.
Under the Cayman Islands’ National Pensions Law (Pensions Law) every employer must provide a pension plan for every person working for the employer,including expatriates who have been working for a continuous period of nine months, in the Cayman Islands. Partners, owners, and directors must also be covered by the pension plan. In almost all instances the pension plan is to be a registered Cayman Islands pension plan.
A person is treated as working in the Cayman Islands if:
Full and part-time employees are required to be covered, as are casual employees, probationary staff, and those employees on short-term contracts.
Where an employee is employed by more than one employer, each employer shall be liable to pay contributions to a pension plan for that employee on the employee’s earnings with that employer.
The contributions are related to total earnings. Earnings include salary, wages, leave pay, fees, commission or gratuity, as well as bonus payments that exceed 20 percent of basic pay. Earnings do not include severance payments, retirement long service recognition payments, and health insurance premiums that are paid by the employer. Persons earning more than KYD60,000 are not required to make pension contributions on the amount above KYD60,000.
Late contributions will be subject to interest. The employee’s contributions must be deducted at regular intervals and together with the employer’s contribution paid directly into the pension fund. Contributions must be made within 15 days of the last day of the month in which the contributions were due.
If the member becomes a non-resident or is an expatriate leaving the Cayman Islands, the member may elect to apply for a refund. In general, the pension’s law states that refunds are NOT allowed from a pension plan. In the event that a member’s account is under KYD5,000, the pension law gives the Trustees of the pension plan the discretion to pay out a refund and to set the conditions under which a refund may be paid.
In general, a trustee may pay a refund if all of the following are true.
If the value of the member’s account is greater than KYD5,000, they may transfer their account (with the Superintendent of Pensions’ approval) to a retirement account in another country. Otherwise, the Pensions Law requires a 2-year waiting period before the member’s pension can be paid out in a lump sum.
A person is deemed to have ceased to be a resident in the Cayman Islands when they have been absent from the Cayman Islands for a period of 6 months or more. When calculating a period of absence, any periods of residence in the Cayman Islands for a continuous period of less than 3 months will not be taken into account.
In any event, the member’s pension cannot be paid out or transferred until their employer makes the final contribution to their account. This may be 6 weeks or more after the member has stopped working. As a result a refund or transfer may take 3 months or more.
Further information is available on the National Pensions Office Web site. Copies of the National Pensions Law can be purchased from the Legislative Assembly in George Town. There are a number of supplemental documents; however, the two primary documents are The National Pensions Law (latest revision) and the National Pensions (General) Regulations (latest revision).
The Legislative Assembly can be contacted at:
Tel. +1 345 949 4236
Fax +1 345 949 9514
What income will be taxed during short-term assignments?
Are there any additional considerations that should be considered before initiating a short-term assignment in the Cayman Islands?
All foreign nationals must obtain work permits through their employer in order to work in the Cayman Islands. Individuals cannot be in Cayman while their work permits are being processed. Permits are issued and are generally renewable for periods of one to 3 years, with a term limit of 7 years in place for most employees, such as those not designated as Key Employees. The permits are normally granted provided there is not a suitable local candidate for the position for which the permit is applied (ascertained through running recruitment ads in local newspapers and/or through the Employment Relations Department). Employers are required to pay the work permit fees in addition to repatriation fees and work permit dependent(s) fees, if applicable.
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