This electronic version is provided for the convenience of reference only and has no official sanction.
SIGNED 15 JUNE 2009
Entered into force 20 December 2010
Effective in the United Kingdom from 1 April 2011 for corporation tax
from 6 April 2011 for income tax and capital gains tax
and from 15 December 2010 for other taxes
Effective in the Cayman Islands from 1 April 2011 for corporation tax
from 6 April 2011 for income tax and capital gains tax
and from 15 December 2010 for other taxes
HM Revenue and Customs
December 2010
EXCHANGE OF LETTERS
BETWEEN THE GOVERNMENTS OF THE UNITED KINGDOM
AND THE CAYMAN ISLANDS
CONCERNING
AN ARRANGEMENT FOR THE AVOIDANCE OF DOUBLE
TAXATION AND THE PREVENTION OF FISCAL EVASION
15th June 2009
Sir,
I have the honour to propose to you –
? the Arrangement between the United Kingdom of Great Britain and
Northern Ireland and the Cayman Islands for the avoidance of
double taxation and the prevention of fiscal evasion (“the
Arrangement”) at Appendix 1 to this letter;
? that the Arrangement shall have effect in accordance with Paragraph
14 thereof;
? our mutual commitment to comply at the earliest date with our
internal procedures required by our respective domestic law for the
bringing into force of the Arrangement and to notify each other
without delay through the formal channels when such procedures
are completed.
I have the honour to propose that, if the above is acceptable to the
Government of the Cayman Islands, this letter and Appendix 1 together
with your reply will constitute our mutual acceptance of the provisions of
the Arrangement.
The United Kingdom welcomes this Arrangement as a significant step in
establishing the Cayman Islands’ status as a jurisdiction which complies
with international standards in the field of taxation, and recognizes the
Cayman Islands’ commitment to transparency and effective exchange
of information in tax matters and to continued progress in this area.
Please accept, Sir, the assurance of our highest consideration,
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Sir,
I have the honour to acknowledge receipt of your letter of 15th June
2009, which reads as follows:
“ Sir,
I have the honour to propose to you –
? the Arrangement between the United Kingdom of Great Britain and
Northern Ireland and the Cayman Islands for the avoidance of
double taxation and the prevention of fiscal evasion (“the
Arrangement”) at Appendix 1 to this letter;
? that the Arrangement shall have effect in accordance with Paragraph
14 thereof;
? our mutual commitment to comply at the earliest date with our
internal procedures required by our respective domestic law for the
bringing into force of the Arrangement and to notify each other
without delay through the formal channels when such procedures
are completed.
I have the honour to propose that, if the above is acceptable to the
Government of the Cayman Islands, this letter and Appendix 1 together
with your reply will constitute our mutual acceptance of the provisions of
the Arrangement.
The United Kingdom welcomes this Arrangement as a significant step in
establishing the Cayman Islands’ status as a jurisdiction which complies
with international standards in the field of taxation, and recognizes the
Cayman Islands’ commitment to transparency and effective exchange
of information in tax matters and to continued progress in this area.
Please accept, Sir, the assurance of our highest consideration,”
I am able to confirm that the Government of the Cayman Islands is in
agreement with the contents of your letter dated 15th June 2009 and
that this letter constitutes our mutual acceptance and making of the
Arrangement contained in Appendix 1 to your letter and appended to
this letter.
Please accept, Sir, the assurance of our highest consideration,
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15th June 2009
ARRANGEMENT BETWEEN THE GOVERNMENT OF THE UNITED
KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND AND THE
GOVERNMENT OF THE CAYMAN ISLANDS FOR THE AVOIDANCE OF
DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION
The Government of the United Kingdom of Great Britain and Northern Ireland
and the Government of the Cayman Islands (“the Governments”);
Desiring to conclude an Arrangement for the avoidance of double taxation and
the prevention of fiscal evasion;
Have arranged as follows:
1. Persons covered
This Arrangement shall apply to persons who are residents of one or both of the
Territories.
2. Taxes covered
The taxes to which this Arrangement shall apply are the following United Kingdom
taxes
a) the income tax;
b) the corporation tax;
c) the capital gains tax; and for the purposes of Paragraph 13 only:
d) the inheritance tax;
e) the value added tax;
and any taxes which are identical or substantially similar to those taxes which are
imposed by either Territory after the date of signature of this Arrangement. The
competent authorities of the Territories shall notify each other of any significant
changes that have been made in their taxation laws.
3. General definitions
1. For the purposes of this Arrangement, unless the context otherwise requires:
a) the term “United Kingdom” means Great Britain and Northern Ireland,
including any area outside the territorial sea of the United Kingdom
designated under its laws concerning the Continental Shelf and in
accordance with international law as an area within which the rights of the
United Kingdom with respect to the sea bed and sub-soil and their natural
resources may be exercised;
b) the term “the Cayman Islands” means the territory of the Cayman Islands
and includes its territorial sea and any areas beyond its territorial sea
within which sovereign rights with respect to the sea bed and sub-soil and
their natural resources may be exercised in accordance with international
law;
c) the terms “a Territory” and “the other Territory” mean the United
Kingdom or the Cayman Islands, as the context requires;
d) the term “person” includes an individual, a company and any other body
of persons;
e) the term “competent authority” means
(i) in the United Kingdom: the Commissioners for Her Majesty’s
Revenue and Customs or their authorised representative;
(ii) in the Cayman Islands: the Cayman Islands Tax Information
Authority;
f) the term “company” means any body corporate or any entity that is treated
as a body corporate for tax purposes or which is otherwise treated as a
body corporate under the law of a Territory;
g) the term “enterprise” applies to the carrying on of any business;
h) the term “enterprise of a Territory” and “enterprise of the other Territory”
mean respectively an enterprise carried on by a resident of a Territory and
an enterprise carried on by a resident of the other Territory;
i) the term “international traffic” means any transport by a ship or aircraft
operated by an enterprise which is a resident of and has its place of
effective management in a Territory except where the ship or aircraft is
operated solely between places in the other Territory.
2. As regards the application of this Arrangement at any time by a Territory, any
term not defined therein shall, unless the context otherwise requires, have the meaning
that it has at that time under the law of that Territory, any meaning under the
applicable tax laws of that Territory prevailing over a meaning given to the term
under other laws of that Territory.
4. Resident
1. For the purposes of this Arrangement, the term “resident of a Territory” means
a) in the case of the United Kingdom, any person who, under its laws, is
liable to tax therein by reason of his domicile, residence, place of
management, place of incorporation or any other criterion of a similar
nature, and also includes the United Kingdom, and any political
subdivision or local authority thereof. This term, however, does not
include any person who is liable to tax in the United Kingdom in respect
only of income or capital gains from sources therein;
b) in the case of the Cayman Islands, any person who, under its laws, is
recognised as a resident by reason of his domicile, residence, place of
incorporation, place of management, or any other criterion of a similar
nature and also includes the Cayman Islands.
2. Where by reason of the provisions of subparagraph 1 a person is a resident of
both Territories, then that person shall be treated for the purposes of this Arrangement
as a resident of the United Kingdom only.
3. Persons to whom subparagraph 2 applies shall not be subjected in the United
Kingdom to taxation which is more burdensome than the taxation which applies to
residents of the United Kingdom in the same circumstances to whom subparagraph 2
does not apply.
5. Business profits of individuals
1. Business profits derived by an individual shall be taxable only in the Territory in
which he is resident unless he undertakes business in the other Territory. If he
undertakes such business, his profits may be taxed in that other Territory, but only so
much of them as is attributable to that business.
2. In determining the profits of such individual, there shall be allowed as
deductions expenses which are incurred for the purposes of his business, including
executive and general administrative expenses so incurred, whether in the Territory in
which the he undertakes the business or elsewhere.
3. Where profits include items of income which are dealt with separately in other
Paragraphs of this Arrangement, then the provisions of those Paragraphs shall not be
affected by the provisions of this Paragraph.
4. No provision of this Paragraph shall be construed as restricting the right of a
Territory to tax its residents.
6. Profits and gains from shipping and air transport
1. Profits of an enterprise of a Territory from the operation of ships or aircraft in
international traffic shall be taxable only in that Territory.
2. Gains derived by a resident of a Territory from the alienation of ships or aircraft
operated in international traffic by an enterprise of that Territory, or moveable
property pertaining to the operation of such ships or aircraft, shall be taxable only in
that Territory.
3. The provisions of subparagraph 1 shall also apply to profits from the
participation in a pool, a joint business or an international operating agency.
7. Pensions
1. Subject to the provisions of subparagraph 2 of Paragraph 8 (Government
service), pensions and other similar remuneration paid to an individual who is a
resident of a Territory, shall be taxable only in that Territory.
2. Notwithstanding the provisions of subparagraph 1, such payments which arise in
the other Territory may also be taxed in that other Territory where the recipient has
not been continuously a resident of the first-mentioned Territory either
a) for a period of 6 years immediately before the commencement of the
payment of that pension, or
b) for a period of 6 years immediately before the commencement
of the employment to which the pension relates.
8. Government service
1. a) Salaries, wages and other similar remuneration paid by a Territory or a
political subdivision or a local authority thereof to an individual in respect
of services rendered to that Territory or subdivision or authority shall be
taxable only in that Territory.
b) However, such salaries, wages and other similar remuneration shall be
taxable only in the other Territory if the services are rendered in that
Territory and the individual is a resident of that Territory who did not
become so resident solely for the purpose of rendering the services.
2. a) Notwithstanding the provisions of sub-paragraph 1, pensions and other
similar remuneration paid by, or out of funds created by, a Territory or a
political subdivision or a local authority thereof to an individual in respect
of services rendered to that Territory or subdivision or authority shall be
taxable only in that Territory.
b) However, such pensions and other similar remuneration shall be taxable
only in the other Territory if the individual is a resident of that other
Territory and has been continuously a resident of that other Territory
either
(i) for a period of 6 years immediately before the commencement
of the payment of that pension, or
(ii) for a period of 6 years immediately before the commencement
of the employment to which the pension relates.
3. This Paragraph does not apply to salaries, wages, pensions, and other similar
remuneration in respect of services rendered in connection with a business carried on
by a Territory or a political subdivision or a local authority thereof.
9. Students
Payments received by a student or business apprentice who immediately before
visiting a Territory was a resident of the other Territory under the laws of that other
Territory, and who is present in the first-mentioned Territory solely for the purpose of
his full-time education at a university, college or other recognised educational
institution of a similar nature, or for his full-time training, shall not be taxed in that
first-mentioned Territory, provided that such payments arise outside that firstmentioned Territory, and are for the purpose of his maintenance, education or
training. The exemption from tax provided by this Paragraph shall apply to a business
apprentice only for a period of time not exceeding one year from the date he first
arrives in the first-mentioned Territory for the purpose of his training.
10. Other income
Items of income not dealt with in the foregoing Paragraphs of this Arrangement
arising in a Territory and paid to a resident of the other Territory may be taxed in the
first-mentioned Territory.
11. Elimination of double taxation
1. Where a resident of a Territory derives profits, income or gains which, in
accordance with the provisions of this Arrangement, may be taxed in the other
Territory, the first-mentioned Territory shall, subject to any provisions of its law
regarding the allowance as a credit against its tax of tax payable in another territory
(which shall not affect the general principle hereof), allow as a deduction from the tax
on the income of that resident, an amount equal to the tax paid in that other Territory.
Such deduction shall not, however, exceed that part of the tax, as computed before the
deduction is given, which is attributable to the income, profits or gains which may be
taxed in that other Territory.
2. For the purposes of this Paragraph, profits, income and gains owned by a
resident of a Territory which may be taxed in the other Territory in accordance with
this Arrangement shall be deemed to arise from sources in that other Territory.
12. Mutual agreement procedure
1. Where a person considers that the actions of one or both of the Territories result
or will result for him in taxation not in accordance with the provisions of this
Arrangement, he may, irrespective of the remedies provided by the domestic law of
those Territories, present his case to the competent authority of either Territory.
2. The competent authority shall endeavour, if the objection appears to it to be
justified and if it is not itself able to arrive at a satisfactory solution, to resolve the
case by mutual agreement with the competent authority of the other Territory, with a
view to the avoidance of taxation which is not in accordance with this Arrangement.
Any agreement reached shall be implemented notwithstanding any time limits or
other procedural limitations in the domestic law of the Territories, except such
limitations as apply for the purposes of giving effect to such an agreement.
3. The competent authorities of the Territories shall endeavour to resolve by
mutual agreement any difficulties or doubts arising as to the interpretation or
application of this Arrangement. They may also consult together for the elimination of
double taxation in cases not provided for in the Arrangement.
4. The competent authorities of the Territories may communicate with each other
directly for the purpose of reaching an agreement in the sense of the preceding
subparagraphs.
13. Exchange of information and tax examinations
1. The competent authorities of the Territories shall exchange such information as
is foreseeably relevant for carrying out the provisions of this Arrangement or to the
administration or enforcement of the domestic laws of the Territories concerning
taxes covered by this Arrangement imposed on behalf of the Territories insofar as the
taxation thereunder is not contrary to the Arrangement. The exchange of information
is not restricted by Paragraph 1.
2. Any information received under subparagraph 1 by a Territory shall be treated
as confidential in the same manner as information obtained under the domestic laws
of that Territory and shall be disclosed only to persons or authorities (including courts
and administrative bodies) concerned with the assessment or collection of, the
enforcement or prosecution in respect of, the determination of appeals in relation to
the taxes covered by this Arrangement, or the oversight of the above. Such persons or
authorities shall use the information only for such purposes. They may disclose the
information in public court proceedings or in judicial decisions. Notwithstanding the
foregoing, information received may be used
a) for other tax purposes with the express written consent of the competent
authority of the Territory that provided the information; and
b) for any other purposes when such information may be used for such
purposes under the laws of both Territories and the competent authority of
the Territory that provided the information authorises such use in writing.
3. Information received under subparagraph 1 by a Territory shall not be disclosed
to any other jurisdiction.
4. In no case shall the provisions of subparagraphs 1 and 2 be construed so as to
impose on a Territory the obligation
a) to carry out administrative measures at variance with the laws and
administrative practice of that or of the other Territory;
b) to supply information which is not obtainable under the laws or in the
normal course of the administration of that or of the other Territory;
c) to supply information which would disclose any trade, business,
industrial, commercial or professional secret or trade process, or
information the disclosure of which would be contrary to public policy.
5. If information is requested by a Territory in accordance with this Paragraph, the
other Territory shall use its information gathering measures to obtain the requested
information, even though that other Territory may not need such information for its
own tax purposes. The obligation contained in the preceding sentence is subject to
the limitations of subparagraph 4 but in no case shall such limitations be construed to
permit a Territory to decline to supply information solely because it has no domestic
interest in such information.
6. In no case shall the provisions of subparagraph 4 be construed to permit a
Territory to decline to supply information solely because the information is held by a
bank, other financial institution, nominee or person acting in an agency or a fiduciary
capacity or because it relates to ownership interests in a person.
7. A Territory may, in accordance with its law and pursuant to any procedures
agreed by the competent authorities, allow representatives of the competent authority
of the other Territory to enter its jurisdiction in order to interview persons, examine
records or to conduct a tax examination in its jurisdiction.
14. Entry into force
1. Each of the Territories shall notify the other of the completion of the procedures
required by its law for the bringing into force of this Arrangement. The Arrangement
shall enter into force on the date of the later of these notifications and shall thereupon
have effect
a) in the United Kingdom:
(i) in respect of income tax and capital gains tax, for any year of
assessment beginning on or after 6th April next following the
date on which this Arrangement enters into force;
(ii) in respect of corporation tax, for any financial year beginning
on or after 1st April next following the date on which this
Arrangement enters into force;
(iii) in respect of other taxes, for charges to tax arising on or after
the date on which this Arrangement enters into force; and
b) in the Cayman Islands: on those same dates.
2. The provisions of this Arrangement shall not impose upon a Territory any
obligation to provide information under Paragraph 13 in respect of a taxable period or
charge to tax as the case may be occurring prior to the later of the notification dates
referred to in subparagraph 1.
15. Termination
1. This Arrangement shall remain in force until terminated by one of the
Territories. Either of the Governments may on or before 30th June in any calendar
year, give notice of termination to the other Government and, in such event, this
Arrangement shall cease to have effect
a) in relation to relief from double taxation, at the end of the year of
assessment or financial year immediately following receipt of that notice;
b) in relation to other matters, from the date of receipt of the notice.
2. In the event that this Arrangement is terminated,
a) all requests for information under Paragraph 13 received up to the
effective date of termination will be dealt with in accordance with the
terms of the Arrangement; and
b) the Territories shall remain bound by the confidentiality provisions in
Paragraph 13 with respect to any information obtained under the
Arrangement.
_______________________