Concept
The Cayman Islands in structuring conversations usually mean funds—and deservedly so. But the jurisdiction also has a standard corporate instrument: the exempted company under the Companies Act—a vehicle of the same class as a BVI company, only a segment higher: more expensive, stricter, and with a reputation accepted by institutional investors. The word "exempted" does not mean exemption from tax—there is no corporate income tax on the islands for anyone—but rather exemption from the rules for local companies: an exempted company may not conduct business within the islands except in furtherance of overseas activities, but is not required to maintain a public register of members. Corporate law is flexible and English in spirit: one shareholder and one director are sufficient with no residency requirements, there is no minimum capital, all classes of shares are permitted, and continuation—transfer of the company to another jurisdiction and back—is allowed. A licensed registered office on the islands is mandatory.
How the Caymans Became a Premium Offshore
There have never been direct taxes in the Caymans: the jurisdiction did not have to "introduce zero," it is historical. The modern industry began with the Companies Law of 1961, written on the model of English corporate law, and banking and trust laws of the 1960s. The fork with BVI came later: while neighbors churned out cheap mass-market IBCs, the Caymans bet on regulated money—the Mutual Funds Law of 1993 attracted hedge funds, and with them administrators, Big Four auditors, and a judicial system with appeals to the London Privy Council. That is why a Cayman company today is perceived not as an "offshore from a catalog," but as an element of institutional structures.
Tax Zero and Tax Undertaking
There is no tax on profits, capital gains, or dividends, and no withholding at source either. A detail that distinguishes the Caymans from most offshores is the tax exemption undertaking under the Tax Concessions Act: a written guarantee from the government that if taxes ever appear on the islands, they will not apply to a specific company.
Comfort comes at a price: the annual government fee is tied to the authorized capital and at the lowest tier (capital up to US$50,000) is approximately US$1,100 per year—versus several hundred dollars in BVI. An annual return is filed every January through the registered office.
Economic Substance
Since January 1, 2019, the International Tax Co-operation (Economic Substance) Act has been in effect—the Cayman version of the common offshore standard of economic substance. Nine relevant activities: banking, insurance, financing and leasing, fund management, headquarters, shipping, distribution and service centers, intellectual property, and pure holding. Those engaged in them must demonstrate that CIGA—core income-generating activities—are performed on the islands: people, premises, expenses, and decision-making on site. For a pure equity holding company, the test is simplified—compliance with registration requirements plus adequate resources for holding shares; in practice, a quality registered office closes the issue. Investment funds are excluded from the perimeter—an annual notification is sufficient for them. Reporting goes to the islands' tax authority and further, through automatic exchange channels, to the jurisdictions of parent companies and beneficiaries.
Beneficiaries and Automatic Exchange
The Beneficial Ownership Transparency Act 2023 applies from July 31, 2024, and in full force from January 1, 2025: companies collect information on beneficiaries with a 25% ownership threshold and transmit it to the state. The register did not become public: since February 28, 2025, access is granted on the basis of "legitimate interest"—for journalists, relevant NGOs, and financial institutions within the framework of KYC—and amendments in 2026 confirmed this model and introduced a fee for access, from a one-time search to an annual subscription (CI$250). In parallel, CRS and FATCA operate, and from January 1, 2026—CARF: crypto providers collect data for the first exchange in 2027.
Reputation and Banking
The Caymans are currently better off with lists than most neighbors. The islands were placed on the EU "black" list in February 2020 due to claims regarding investment fund regulation—and exited as early as October of the same year, after the adoption of the Private Funds Act. Today, the Caymans are absent from both EU lists—both Annex I and the monitoring Annex II (confirmed by the ECOFIN update of February 17, 2026), removed from the FATF "grey" list in October 2023, and from the EU AML list in February 2024. For banks, this is mainstream: a Cayman company account is opened by international banks—more often not on the islands themselves, but in Hong Kong, Singapore, Switzerland, London, or the US. The set of questions is standard: substance, beneficiary information, source of funds, and CRS status; without any of these elements, there will be no account.
Application
Typical roles for an exempted company are: top holding in structures with institutional investors, SPV for an M&A or securitization transaction, joint venture of partners from different countries, general partner or master company alongside a fund. A separate niche is crypto: the Virtual Asset (Service Providers) Act 2020 created a two-tier CIMA regime, and since April 1, 2025, custodians and trading platforms operate only under a full license; major crypto groups regularly choose the Caymans as their parent jurisdiction. The choice against BVI is pragmatic: where the price of the vehicle matters—BVI is taken; where the structure is scrutinized by funds, banks, and institutional LPs—the Caymans. For a Russian beneficiary, a Cayman company is a classic CFC with all notifications and imputation of profits, and personal relocation to the islands is a separate topic of Cayman residence.
Evolution of the Regime and Conclusions
The Caymans have undergone the same transformation as all classic offshores: the zero rate remains, anonymity and "paper" companies are gone. The difference is in positioning: the jurisdiction consciously pays for the status of a regulated financial center—substance, BOTA, CARF, crypto licensing—and in return receives a place off the lists and the trust of banks. For large groups, zero is partially consumed by Pillar Two: with revenues from €750 million, profits are still brought up to an effective 15% in other links of the structure. For a private owner, zero is also not obtained—at home, profits are caught up by the CFC regime. A Cayman exempted company is justified where what is needed is not "cheap zero," but a neutral vehicle with the maximum level of acceptance by institutional counterparties.
This material is for expert informational purposes and does not constitute individual tax or legal advice.