Cayman Islands submits opinion on Solvency II

The Cayman Islands has submitted an opinion to the Organisation for Economic Co-operation and Development (OECD) on the current proposed pillar one and pillar two of Solvency II.

Cayman Finance, an association that represents the financial services industry in the country, wrote the submission.

In the submission, the domicile reiterated its position as a tax-neutral hub with law-abiding citizens, saying that a zero tax rate is not harmful.

“The Cayman Islands exercises a legitimate economic policy choice to apply a zero rate of tax on all corporations and meets its revenue needs through customs duties and fees,” the submission reads.

A zero tax rate on corporations is recognised at both OECD and EU levels as not being harmful unless combined with harmful elements such as ring fencing, lack of transparency and the absence of adequate substantive activities.”

Cayman also argued that zero tax jurisdictions play a “key enabling role” in global growth.

“Tax neutral jurisdictions such as the Cayman Islands play a key enabling role in the efficient
allocation of capital providing unparalleled access to global finance and liquidity leading to
more trade, innovation, economic growth, employment, and government revenue in both developed and developing nations,” the submission states.

The submission contains comments on a number of specific aspects of the pillar two blueprint, including investment funds neutrality, scope of the carve-out for substantive activities, use of jurisdictional blending to compute effective tax rates and use of statutory tax rate for Subject-To-Tax Rule.

The domicile has submitted opinions during two previous consultation periods.

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