HACKER Q&A
📣 testmasterflex

Disadvantages of Incorporating in Caymans?


Cayman Islands has 0% company tax which becomes a huge save on profits. I won’t be living there thus pay income and capital gains where I live.

I’m currently at a stage where I want to shift to full gear of selling a consumer product and am investigating whether I should get funding and if so, incorporate in US or Caymans.

Anyone has expertise with Cayman companies?

My first thought is people think I’m trying to hide something and scare investors.

  👤 robocat Accepted Answer ✓
In most tax jurisdictions, you declare taxes on your worldwide income. Although you might pay $0 to the Cayman Islands, you will likely end up needing to pay tax to your own country (depending on the exact tax rules for foreign income). This can be complicated, and you will likely need an accountant to help you with your tax return. You might be able to get away with evading your taxes, but I wouldn't recommend trying.

Secondly, there are costs associated with incorporating in the Cayman Islands. You might need local directors ($x by 10k per year?). The Cayman Islands does not want small business owners - their target market is huge funds not risky scammers. Minimum fees for professionals are eye-watering. If anything goes wrong, you could be bankrupted by process.

This area is something you pay an specialised foreign investment accountant to get advice about. If you are not already using a suitable accountant, then you most likely shouldn’t touch the idea. The fact you are asking HN is a strong signal to me that you have no idea what you are doing.

Finally, the reason the investors use the Cayman Islands are because (1) taxation only occurs in the country of the investor which simplifies everything for investors, and (2) it is a known legal risk that large investors have familiarity with, so investors don’t need to investigate expensive tax and legal implications because they usually already understand the risks.

👤 ArtWomb
Never done this. And have no advice. But I understand Caymans' incorporation possesses certain trans-national advantages. Play is to re-incorp in US.

An Updated Look at Doing Business in China via Cayman Islands

https://assets.fenwick.com/legacy/FenwickDocuments/Doing_Bus...

"tax cloud", "revenuetech", whatever you wish to call it, is a hot sub field of fintech / gov services right now. And the offshoring / re-patriation debates are typically around trillions in parked capital waiting to be invested.

Let us know what you discover ;)

👤 ffhhj
You can incorporate in both, the problem is in which country the bank account is located.
👤 Spooky23
It’s super shady.

Check out the US Virgin Islands.