CAYMAN ISLANDS Law and Practice Contributed by: Sailaja Alla, Matt Mulry, Maree Martin and James Mossetto, Appleby
The BOR must be maintained with current and up- to-date information with the legal person’s corporate services provider. 3.4 Tax Regime for Managers
Economic substance requirements are satisfied by an entity in the case of the following. • It conducts core income-generating activities in the Cayman Islands. • It is directed and managed in an appropriate man - ner in the Cayman Islands. • Having regard to the level of relevant (ie, gross) income derived from the relevant activity carried out in the Cayman Islands, it: (a) has an adequate amount of operating expendi - ture incurred in the Cayman Islands; (b) has an adequate physical presence in the Cay - man Islands; and (c) has an adequate number of full-time employ - ees or other personnel with appropriate qualifi - cations in the Cayman Islands. The ES Act permits the outsourcing of activities to ser - vice providers in the Cayman Islands, and such out - sourcing could aid in satisfying some of the economic substance requirements. See also 3.7 Outsourcing of Investment Functions/Business Operations . Economic substance requirements do not apply to: • advisory services where no discretion is exercised over the assets of the fund; and • entities that are tax-resident outside the Cayman Islands. The satisfaction of the economic substance require - ments will be a question of fact. There is no one-size- fits-all approach and much depends on the size and scope of the business (both in the Cayman Islands and in other locations) and the expected gross income in the Cayman Islands. 3.9 Change of Control Under Cayman Islands law, no regulatory or investor approvals are required in connection with a merger, sale, restructuring or similar transaction involving a SIBA registered fund manager or its parent compa - ny. Notice of any such change has to be provided to CIMA within 21 days. However, if the fund manager is licensed with CIMA, CIMA’s prior approval is required for any transactions
Please see 2.4 Tax Regime for Funds . 3.5 Rules Concerning Permanent Establishments
There are no rules regarding permanent establish - ments or other taxable presences in the Cayman Islands. Please also see 2.4 Tax Regime for Funds . 3.6 Taxation of Carried Interest Please see 2.4 Tax Regime for Funds . 3.7 Outsourcing of Investment Functions/ Business Operations Managers can outsource investment functions or business operations. CIMA has issued a Statement of Guidance setting out its minimum expectations regarding the outsourcing of material functions or activities, as well as outsourc - ing arrangements for SIBA registered/licensed man - agers and certain other CIMA regulated entities. Some of the key provisions include the requirement to: • have a written outsourcing agreement; • maintain the same level of oversight and account - ability on outsourced functions and activities as would be applied to non-outsourced functions and activities; • implement a risk policy on outsourcing; and • conduct due diligence on a service provider in order to ensure that the service provider can effectively perform the outsourced functions and activities, and to identify and manage any conflicts of interests. 3.8 Local Substance Requirements If a Cayman Islands alternative fund manager provides discretionary fund management services to an invest - ment fund, economic substance requirements may apply pursuant to the International Tax Co-operation (Economic Substance) Act (the “ES Act”).
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