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Precious metals such as gold have enjoyed a bullish market as of late, with the price on an upward trajectory. Given the present state of affairs regarding global economic uncertainties and volatility, it’s no surprise that investors are turning to the glittering precious metal as a hedge against the turmoil. Yet, the question that remains is where to store your gold investment. For some, offshore gold storage could be the best option, and there’s no better offshore location than the Cayman Islands. Here are 4 reasons why the Cayman Islands are a great place for storing your gold bullion coins and bars.
Cayman Islands Are A Tax-Neutral Jurisdiction
The Cayman Islands are an autonomous British territory located in the Caribbean. Comprised of the three islands Grand Cayman, Little Cayman, and Cayman Brac, the territory covers 264 square km.
One of the principal reasons that make the Cayman Islands such a great place for investors to store gold offshore is the fact that the territory is regarded as a “tax-neutral jurisdiction”. In essence, the territory doesn’t impose any corporate, income, withholding tax, or capital gains tax. Additionally, there are no estate or death inheritance taxes applied to real estate on the islands, or any other assets held within the territory. This tax neutrality means that an investor is only taxed once in the country where the investor possesses citizenship, with the proceeds of the investment taxed as either income or capital gains.
“As a place to conduct business, Cayman’s appeal is obvious. The country, a British Overseas Territory, levies no income or corporate taxes, and, since the 1960s, it has become one of the world’s most sophisticated banking centers. While Cayman was once a shady place to stash illicit cash — a reputation cemented by the 1991 John Grisham novel “The Firm” and a subsequent Tom Cruise thriller — it has long since moved aggressively upmarket, courting institutional investors, private equity and trading firms seeking to minimize taxes and bureaucracy, “ explained The New York Times.
Likewise, the storage of gold and other precious metals aren’t subject to any sales tax.
“The banks moved in first, then the accounting and law firms. Seven Mile Beach, previously undeveloped, became an international tourist attraction for both divers and money managers. By the end of the 1990s, the jurisdiction had established itself firmly as a leading global banking center, and today financial services accounts for over half of its economy,” the NYT further explained.
According to legend, the Cayman Islands tax neutrality stems from a token of gratitude, as it were. A British prince found himself shipwrecked on the northern section of Grand Cayman. Evidently, a local island resident espied the shipwreck and came to the assistance of the prince and his crew, essentially saving the lives of many. In gratitude, said prince decreed that citizens of the Cayman Islands would never be subject to taxation.
The Territory’s Close Proximity To North America and Latin America
The Cayman Islands are situated in the northwest portion of the Caribbean Sea. Geographically, the islands are ideal for their close proximity to North America and Latin America. The territory is located roughly 700 km (430 mi) south of Miami, Florida, and about 750 km (47 mi) east of Mexico. From other major US centers such as New York or Los Angeles, there are numerous daily departing flights to the Cayman Islands.
Gold Is Not Subject To Any Import Or Export Tariffs On The Cayman Islands
Another reason why the Cayman Islands are a great place to store your gold bullion is because it’s not subject to import or export duties. Under the Cayman Islands Customs Tariff Law, precious metals bullion such as gold and silver are classified as duty-free goods.
In 2016, the government of the Cayman Islands requested assistance from the British government to perform reviews on customs functions within the territory. Two years later, Sue Winspear, the auditor general of the Cayman Islands performed an audit of the territory’s customs division, and released a report. Amongst other findings that the report concluded, were pertaining to duty-free goods:
“Approval letters do not always specify the total amount of the concession to be granted; the percentage of the total import duties; the types of goods to be imported duty-free; or expiration dates. This means that individuals and companies with approved concessions could exceed the approved limit (of waived import duties), or continue to import goods duty-free forever or import unqualified goods without paying duties when they should have”
As per the findings of the audit general, amongst other items not subject to import or export duties include jewelry made from precious or semi-precious stones.
The Cayman Islands’ position in international portfolio investment, mid-2015. (Source: IMF/tandfonline.com)
Political And Social Stability Of The Cayman Islands
Perhaps the paramount concern for any investor contemplating offshore gold storage, is the potential for political and social instability in a country. Social and political unrest can lead to governments and regulators altering legislation and policies with no prior notice, and without factoring the far-reaching implications.
Fortunately, the Cayman Islands is an autonomous British overseas territory (BOT), meaning that it is a non-self-governing territory connected to the United Kingdom. Any legislation must first receive royal assent from Queen Elizabeth, and she appoints governors on advice from the British government.
Because of its connection to the United Kingdom, the Cayman Islands enjoys first-world infrastructure. The territory boasts three airports, and a fleet of public transport minibusses that operate on Grand Cayman. There are two seaport, one on Cayman Brac and another in the capital George Town on Grand Cayman. In addition, the territory has 488 miles (785 km) of paved highways, with driving on the left, as in the United Kingdom.
In addition, the Cayman Islands have no history of war or social instability. The territory has remained neutral apropos of all international disputes. In fact, it wasn’t until October 2019 that the territory’s government announced the formation of a military regiment next year, which would be a volunteer reserve force. Yet, the impetus isn’t for defense but rather humanitarian relief assistance, responding to natural disasters in the region such as hurricanes.
“It would be useful for the overseas territories to have their own capacity for emergency response. This will be locally recruited and locally-led,” explained Mark Lancaster, UK Minister of State for the Armed Forces.
This is the first time that the Cayman Islands’ have such a military unit in its history, and the territory’s premier, Alden McLaughlin was clear that this wasn’t the creation of an army.
“We’ve demonstrated how much we care about our brothers and sisters across the region. These events are becoming more and more common. It’s very clear that as a region we need to work together,” said Premier Alden McLaughlin regarding the regiment’s proposed disaster relief assistance.
Utilizing Private Offshore Storage Companies
There are numerous reasons why the Cayman Islands are a great place for storing your gold bullion coins and bars. Its tax neutrality, political and social stability, and the fact that gold is deemed a duty-free entity are all contributing factors. The territory is the fifth largest financial services market on the planet. Moreover, the Cayman Islands is among the safest jurisdictions for offshore asset storage, with several world-class storage firms.
For those investors who decide upon offshore storage, there is a wealth of private storage companies that guarantee full protection of your gold investment. For those investors who are leaning towards storing your gold offshore, here are the top companies for your offshore gold investment, to get a better understanding of the of your options.
Sarah Bauder is a financial writer with over a decade of experience at numerous online publications, writing about alternative investments, retirement, US politics, world economy and more.
