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Cayman to impose new payroll tax on expats

30/07/2012
Tax

Tax (Photo credit: 401(K) 2012)

By Marcia Breen
Published Jul 27, 2012

The government of the Cayman Islands on Wednesday announced it will, for the first time, impose a payroll tax — but only on expatriate workers.

Work permit holders there, who make $20,000 (Cayman dollars) a year or more, will soon have to pay nearly ten percent of their earnings in tax, no matter how high their salary is — a move that could bring in about $50 million in revenue to the Cayman government.

At the same time, the Cayman government plans to no longer require employers to make a five percent contribution to expat employees’ pensions. And employers will not be obligated to pay any of the payroll tax.

If an employer chooses to pay half of the payroll tax, the rate of taxation will be 9.52 percent of the employee’s gross salary. If they do not pay any of the money they save from not contributing to the person’s pension, then the rate of taxation will be 14.28 percent.

Cayman Premier McKeeva Bush, who called the tax a “community enhancement fee”, said he did not want to impose the tax, but “had no choice” because the UK was demanding a sustainable budget.

While both British Overseas Territories, Cayman, unlike Bermuda, needs UK approval to pass its budget.

Bermuda’s payroll tax is 14 percent — higher than Cayman’s proposed 9.52 percent, but only slightly lower than if the employer chooses not to pay half — 14.28 percent. That would be the highest rate of Cayman’s main offshore financial centre competitors.

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