Knowledge

As we have all seen in recent years, obtaining an alternative right of residence (in some cases citizenship), and an ability to leave one country and settle in another, is becoming increasingly important for our clients. Allied to this, as the world becomes ever more interconnected, so does the attractiveness and viability of making lifestyle choices about where to reside and conduct business.

Wealthy individuals, their families, family offices and businesses face an increasing number of global, personal, commercial, and political risks, which are driving their desire to use the Cayman Islands residency programmes as a tool to manage those risks.

Appeal Of The Cayman Islands (Cayman)

Cayman is an English-speaking British Overseas Territory that is located a sixty minute flight from Miami in the western Caribbean Sea.

Every year, a growing number of international HNW and UHNW individuals and families from an array of different jurisdictions develop a strong desire to take advantage of Cayman's unique position of being able to offer tax neutrality alongside one of the highest GDP's and standards of living in the world.

Due to our traditional values of community and privacy, and the fact that it is a safe and secure place for individuals and families to live, with one of the lowest crime rates in the Caribbean, Cayman is a permanent home to many HNW and UHNW individuals who are attracted by its natural beauty, the ever-increasing sophistication of its infrastructure, a stable government, strong rule of law, excellence as an international financial centre with a very high concentration of industry professionals, an innovative approach in supporting and growing new and existing businesses, elite health services and education, a cosmopolitan outlook (with over 135 different nationalities), direct accessibility from numerous major cities across the USA, Canada, and the UK, and the fact that it is often referred to as the culinary capital of the Caribbean.

Cayman's continued economic stability provides extra pull to new residents. Notwithstanding Cayman's tax neutrality - there is no income, capital gains, property, estate, inheritance, wealth, sales, or corporate taxes, and no restrictions on foreign ownership of real estate - it operates a highly efficient consumption-based duty collection model. Cayman's Government ended 2022 with a c.US$58m operating surplus as a result of revenues reaching c.US$1.25bn.

There is no sign of any slowdown, with current 2024 revenues forecast to reach US$1.34bn (and US$1.39bn in 2025), and current 2024 operating surplus forecast to reach US$52m (and US$65m in 2025). Such considerable operating surplus provides Cayman's Government with an ability to continue spending significant sums on infrastructure, thereby directly benefiting residents and contributing to why Cayman is often described as the Singapore or Monaco of the Caribbean.

Trends In Applicants For Residency

Certificates of Permanent Residence for Persons of Independent Means (PR)

When our practice first started handling Cayman residency applications over a decade ago, it was mainly a case of retirees looking for somewhere idyllic to reside with a slow pace of life. Applicants typically purchased a condominium in one of the beachfront complexes and a corresponding 25-year Residency Certificate that did not lead to citizenship nor an ability to seek employment in Cayman.

However, in recent years, there has been a significant shift towards wealthy families with young children acquiring PR, and physically relocating themselves and their families to Cayman. For many, PR is the ultimate option. Not only does it provide a holder and spouse with a lifetime grant to reside in Cayman for a minimum investment of US$2.44m in developed real estate, it also gives them both an ability to work (should they wish to do so). Crucially, PR also provides the entire family with a pathway to Caymanian and British citizenship without any obligation to surrender existing residencies or citizenships.

In our experience, it is this defined pathway to British citizenship that appeals most to our clients. The first stage of that process requires each family member to obtain naturalisation as British Overseas Territories Citizens (BOTCs) on account of their legal and ordinary residence in Cayman during the relevant five-year period following their grant of PR. Once naturalised, the second stage requires each family member to apply for British Overseas Territory (Cayman Islands) passports. Upon receipt of their Cayman passports, the third stage requires each family member to apply for registration as a British Citizen with all the rights and privileges that entails, including obtaining a full British passport, which can be applied for once registered.

Provided each of these applications is submitted in a timely fashion, and their consideration is not protracted, that entire process can be achieved within one year, such that the whole family can acquire full British passports within six years of the initial grant of PR.

Finally, it is worth noting that once the holder of the PR has been naturalised for five years, they are eligible to apply for the right to be Caymanian (Cayman Status) on grounds of naturalisation. Following an approval, a dependant spouse and children will also be eligible to apply.

Residency Certificates by way of a Substantial Business Presence (SBP)

A more recent addition to Cayman's residency options, SBP was developed to encourage businesses and family offices to come to and thrive in Cayman by providing their key players with an easier and clear pathway to residency.

SBP provides the holder and their family with an ability to reside in Cayman, and for the holder to work within an approved category of business in a senior management capacity (which translates as a role attracting an annual occupation fee of at least US$25,000 payable to our Government).

The holder is at liberty to work in an existing business, but generally what we see is that applicants first incorporate an exempted company (being a company that is carrying on business mainly outside of the jurisdiction), set themselves up as the sole shareholder and director, then apply for SBP to obtain the requisite permission to employ themselves in their newly formed exempted company.

This route has been very popular with investment managers and financial traders, essentially individuals who wish to transfer their global businesses to Cayman and are happy to work from a home office. We have also seen this option used when transferring family offices, and as a mechanism that enables the directors to conduct the day-to-day management and establish the hub of the family office in Cayman.

In our view, the attraction of this Certificate lies in its simplicity and certainty. There are no renewal applications or associated licencing requirements. There is no requirement for personal or commercial real estate investments, nor is there a need to lease commercial premises.

The fact that this route also offers a defined pathway to British citizenship provides further appeal, albeit the timeframe involved is slightly longer than the PR route described above. After a period of eight years, the family can apply for permanent residence under Cayman’s points system, an application process that involves points being awarded based on certain criteria relating to employment, qualifications, community contributions, investments, financial stability, and demographics. Once granted, and after a further period of one year, each family member can embark upon the three-stage application process described above such that the entire family can acquire full British passports within ten years of the initial grant of SBP.

Trends In Geographical Locations Of Applicants For Residency

Five years ago, most of our clients emanated from Canada and the United Kingdom. Whilst those nationalities are still very well represented in our client base, we are regularly assisting applicants from a wide array of different jurisdictions.

Over the past few years, if you analysed a cross-section of our residency clients, broadly speaking out of every ten applicants, four emanated from Canada, two from the United Kingdom, two from the United States of America, and two from the rest of the world (thus far encompassing families relocating from countries including Australia, Hong Kong, Switzerland, Dubai, Singapore, Monaco, Israel and Brazil).

One of the most interesting trends in recent years has been the number of enquiries we regularly receive from Americans and/or their advisors indicating a desire to obtain residency in Cayman even though, unlike exiting Canadians or Brits, there may not ever be the same level of associated tax neutrality benefits. Often it is a lifestyle play for Americans, but on occasion, the move may also be prompted by a corresponding desire to renounce US citizenship. In those circumstances, we work very closely with our clients' onshore tax and wealth structuring advisor(s) to ensure the Cayman residency piece fits into the wider mandate, which itself may include the clients first obtaining a second citizenship from another, usually Caribbean, jurisdiction.

Predicting The Future

As the world becomes wealthier and more mobile, and the desire to be genuinely offshore continues to grow, so will the trend towards obtaining an alternative right of residence (and in some cases, citizenship) in places like Cayman.

Once established in the jurisdiction, our clients tend to also require local and international expertise when it comes to wealth structuring, succession planning, family business structuring, governance, and regulatory matters, and all the associated high-end immigration and real estate services. Unlike any other firm in Cayman, we have expertise in all these areas, and often these are in fact the motivating factors to the acquisition of residency, as clients have a strong desire to take advantage of Cayman's unique position of tax-neutrality combined with world-class professional services in one of world's leading offshore financial centres.

Originally published in IFC Review