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There are a number of advantages to Cayman Islands incorporations, such as (under some complicated circumstances) delaying recognizing income until repatriation
by jmalicki 9y ago
There are a number of advantages to Cayman Islands incorporations, such as (under some complicated circumstances) delaying recognizing income until repatriation (allowing for the money that would have gone to taxes to compound for some time), or avoiding Unrelated Business Income Tax for an IRA or non-profit entity that invests in a business that takes on debt (the latter being an extremely common reason above-board entities use Cayman Islands blocker corporations).
http://www.taxpolicycenter.org/taxvox/why-do-us-investment-funds-operate-tax-havens http://www.taxpolicycenter.org/taxvox/why-do-us-investment-f...
- ThrustVectoring 9y agoTax deferral doesn't help you if you pay at the same rate at repatriation. Multiplication commutes, paying either before or after compounding doesn't matter. It could help for, like, maintaining ACA subsidy eligibility.
- jmalicki 9y agoYes, it does: Imagine 39% tax, where you compound at 10%. If you pay tax once per year, that becomes 6.1% after tax. 1.061^5 - 1= 0.34455 Now imagine you compound for 5 years at 10%, then repatriate and pay 39% on your profits: (1.1^5-1)*.61 = 0.37241 You have 10% more if you defer taxes.