Cayman Islands Dollar (KYD)

The national currency in the Cayman Islands

What is the Cayman Islands Dollar (KYD)?

The Cayman Islands Dollar (KYD) is the national currency in the Cayman Islands. Located just south of Cuba, the Caribbean country is composed of three major islands – Grand Cayman, Little Cayman, and Cayman Brac.

 

Cayman Islands Dollar (KYD)

 

Recognized as one of the great “tax havens” of the world because the country does not impose a corporate income tax, Cayman Islands is considered an ideal place for international corporations.

 

Summary

  • The KYD is the national currency of the Cayman Islands.
  • introduced in 1972, the KYD remains as one of the top currencies in the world.
  • It offers a fixed exchange rate with the U.S. dollar – 1 KYD = 1.2 USD.

 

History of the KYD

Below is a general overview of the history of the Cayman Islands Dollar (KYD):

  • First introduced in 1972, the KYD replaced the then-standing Jamaican Dollar.
  • Shortly after the KYD became the primary currency of the Cayman Islands, the Jamaican dollar discontinued as legal tender.
  • Coins are denominated into 1 cent, 5 cents, 10 cents, and 25 cents.
  • Banknotes are denominated into $1, $5, $10, $25, $40, $50, and $100.
  • The Cayman Islands Monetary Authority began overseeing the issuance of the currency in 1997.
  • It offers a fixed exchange rate with the U.S. dollar – 1 KYD = 1.2 USD.

 

Fixed Exchange Rate

In 1974, the Cayman Islands Currency Law (1971) was updated. It was done to show parity between the USD and the KYD. The fixed exchange rate is 1 KYD = 1.2 USD.

Let’s say a businessman wishes to transfer $500 from the United States to the Cayman Islands. It will result in the application of the fixed conversion rate.

The calculation will be ($500 USD / 1.2) = 416.67 KYD.

 

Cayman Islands as a Tax Haven

As mentioned, the Cayman Islands is an ideal spot for international corporations. It is because the country is considered a “tax haven,” which means that the country imposes very forgiving tax laws or no tax laws at all.

The Cayman Islands does not enforce a variety of taxes. They include corporate tax, direct tax on residents, income tax, property tax, payroll tax, withholding tax, sales tax, foreign exchange restrictions, and capital gains tax.

Also, transfers are exempt from taxation, including transfers on death.

 

Why are Businesses Choosing the Cayman Islands?

Financial interaction with the Cayman Islands is constantly growing due to its tax laws. In addition, the country provides offshore banking services that allow individuals and businesses to avoid taxes they would need to pay in their home country.

If an organization were to operate a subsidiary in the Cayman Islands, it would be able to direct sales through the subsidiary rather than the organization’s headquarters.

Directing sales through the subsidiary allows the organization’s profit to be levied based on Cayman Islands tax laws (tax haven).

Apart from businesses, investors gain tax benefits. Tax is not levied on interest or dividends that are earned through investments.

 

Businesses Operating in the Cayman Islands

Several companies operate in the Cayman Islands, including:

  • Air Canada
  • American Airlines
  • ATC Trustees
  • Bank of China Grand Cayman
  • Bank of America
  • Delta Airlines
  • Shell Corporation

 

Revenue Generation in the Cayman Islands

For a country that does generate revenue from taxation, it would be hard to imagine how it remains afloat. The Cayman Islands generates revenue from other outlets. Revenue generation in the country is done through work permit fees, tourism fees, import duties, and financial transactions.

Although the country is exempt from a majority of taxes, duty taxes are enforced on most imports. The tax rate on the majority of imports is around 22% to 27%. Also, some necessary items are exempt from duty taxes. It is not the same for expensive imports, such as vehicles, which can be taxed as high as 42%.

 

Related Readings

CFI is the official provider of the global Certified Banking & Credit Analyst (CBCA)™ certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional CFI resources below will be useful:

  • National Currency
  • Foreign Exchange
  • Capital Gains Tax
  • Tax Shield

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