Cayman Islands on the EU blacklist; Can the relocation of alternative investment funds solve the problem?
Recently, the European Union added the Cayman Islands, a British overseas territory, to its blacklist of uncooperative tax havens.
The EU took the view that the Cayman Islands had not implemented appropriate measures to prevent tax abuse and would allow companies to register there despite a minimal presence in the territory. Along with the Cayman Islands, the EU also blacklisted Panama, Palau and the Seychelles.
Companies registered in blacklisted countries face considerable difficulties in accessing the EU market in the course of their business activities.
More than 10,000 investment funds are domiciled in the Cayman Islands. Due to the blacklist, the large number of alternative investment funds registered in the Cayman Islands in particular are likely to have considerable difficulties attracting investors from countries other than the EU. In particular, they may find it difficult to invest their assets in the EU and the European Economic Area, as the acceptance of Cayman Islands structures by banks in the EU and EEA is declining. This can significantly impair their investment strategies.
In view of this situation, several funds are considering relocating from the offshore jurisdiction of the Cayman Islands to onshore jurisdictions such as Liechtenstein.
Liechtenstein has had an agreement on the automated exchange of information in tax matters (AEOI) with the EU since 2015 and is generally regarded as a reliable member of the OECD countries that has implemented effective measures against tax evasion and money laundering.
Liechtenstein offers attractive framework conditions for alternative investment funds. In addition to the fact that no taxes are levied on the funds, one of the main advantages is the time frame for setting up an investment fund and starting business. As a rule, the alternative investment fund can be established within two months. The transfer of existing investment funds from foreign jurisdictions to Liechtenstein also regularly takes place within a similar time frame. Since February 2020, the registration procedure for alternative investment funds with the Liechtenstein Financial Market Authority has been further simplified, thereby further increasing efficiency.
Several years ago, a large number of investment funds from the Cayman Islands decided to relocate to Liechtenstein in order to become on-shore. In light of the EU’s latest measure, Liechtenstein can expect another wave of relocations, as this move will allow investment fund managers to cope with the difficulties ahead.
Contact us if you would like to find out more about alternative investment funds in Liechtenstein and how to make use of the legal regulations.