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Foreword

This document has been developed by Cayman Finance to share key information about the critical role of the Cayman Islands financial services industry in the global economy, and in particular to highlight how the Cayman Islands are well positioned to be an “extender of value ”and an important partner in Brazil at a time when Brazil focuses on strengthening its economy and attracting foreign investment against a backdrop of evolving global trade relations and other significant changes in the economy local and global.

The Cayman Islands is a leading global tax-neutral financial center that effectively connects users and providers of law-abiding private equity and finance worldwide and has a long-standing relationship with Brazil.

At a time when foreign investment and global trade supporting a stronger economy are important cornerstones of Brazilian economic policy, the Cayman Islands is the world’s most widely used tax-neutral financial center for international investment. , providing a proven, reliable, stable, tax neutral and well-regulated environment designed to support global investment and trade.

As was demonstrated in 2006 and 2009, by the signing of Memoranda of Understanding (MOU) with the central bank of Brazil and the Securities and Exchange Commission, respectively, and in 2013 by the signing of an agreement of ‘Tax Information Exchange (TIEA), the Cayman Islands have long been and continue to be well positioned as a’ global value extender ‘for Brazil, its businesses and its citizens, whether by providing solutions competitive for global trade, by aiding global / local investment and financing activities or by providing an infrastructure that is dynamic enough to support Brazil as the country enters a new era of global trade relations.

With that in mind, this document provides the basis for communicating the benefits the Cayman Islands can bring to Brazil in its role as a global financial services center.

Additionally, it illustrates how the Cayman Islands are positioned to work in partnership with Brazil to support its economy, businesses and citizens to maximize its potential in a changing global economy.

The Cayman Islands, with their central role in international investment and financing, supported by its strong and well-regulated financial services sector, can help Brazil as it focuses on strengthening its economy and presence. global by providing unprecedented access to:

  • Foreign direct investment or “FDI” (essential to save or develop Brazilian businesses and jobs)
  • Inbound investment and financing in infrastructure
  • Liquidity for the Brazilian economy
  • Job growth in Brazil
  • Increase in the tax base in Brazil
  • Diversified global investments for retirees and Brazilian endowments
  • Free movement of world trade, capital, investment, finance and services.

Data from the International Monetary Fund indicates that the Cayman Islands already rank in the top five for portfolio investment assets inside and outside Brazil. In 2011, global investor capital flows channeled through investment funds from the Cayman Islands to Brazil totaled some US $ 17 billion. These flows are used for projects such as large infrastructure and asset finance. In addition, in 2017, the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes estimated that in just one recent year, the Cayman Islands attracted at least $ 4.1 trillion. US dollars of bank assets, direct investment and portfolio investment.

Due to their global recognition and pro-business approach, the Cayman Islands is a leading home for alternative investment funds. The Cayman Islands Monetary Authority (CIMA) regulated approximately 11,000 open-ended alternative investment funds in 2018. Closed, open-ended and closed-end alternative investment funds are also domiciled on the islands. In fact, 70 percent of non-US domiciled alternative investment funds managed by advisers registered with the US Securities and Exchange Commission are domiciled in the Cayman Islands. At the end of 2017, the value of the total assets under management of the Cayman Islands funds regulated by the CIMA reached US $ 6.94 trillion and the net assets stood at US $ 4.03 trillion.

Cayman is strategically positioned to provide foreign investment, financing and liquidity to economies in times of need or uncertainty (such as after the global credit crisis of 2008), as one would expect with developments. global trade relations.

The Cayman Islands investment fund industry provides solutions and vehicles to facilitate trade to and from Brazil, which in turn creates jobs, expertise and tax revenue for Brazil. The Cayman Islands investment fund industry also provides a comprehensive solution for Brazilian asset managers and family offices to effectively access international markets. The Cayman Islands Investment Fund is the global collective investment vehicle of choice for investors in the United States, China, Japan, Latin America, the Middle East, and many other countries. It is used by international investors in these regions to aggregate foreign investment in countries around the world, including Brazil; facilitate the co-investment of Brazilian investors with others around the world; and enable asset managers in Brazil to offer local (Brazilian) investment opportunities to international investors.

Collective investment funds are also called “collective investment vehicles” (CIV) or “collective investment undertakings” (UCI). In 2005, the OECD published a white paper on the governance of collective investment undertakings which explains UCIs as follows: “The underlying concept of UCIs is simple. Mutual funds are a form of institutional investment through which individuals pool their funds and hire professionals to manage their investments, with each investor entitled to a proportional share of the net benefits of ownership of the underlying assets. its legal form, a mutual fund generally consists of: (i) pooling of resources to gain sufficient size for portfolio diversification and profitable operation (ii) professional portfolio management to execute an investment strategy. “

For example, Cayman-based private equity funds are frequently used to facilitate the investment of foreign capital in infrastructure development in hospitals, schools, roads, power plants, etc. quality of life in Brazil. Additionally, as the Brazilian government seeks to embark on a number of reforms that will hopefully make the country once again a quality jurisdiction, foreign investment will become increasingly comfortable investing in Brazilian companies requiring foreign capital as well as providing debt financing to companies. in trouble. As a result, employees are rehired, new jobs are created and an increased tax base will be provided to the country. By working hand in hand with Brazil as a partner, these enormous benefits can be extended to the Brazilian economy through foreign investment from the Cayman Islands.

In addition, many Cayman Islands fund service providers are based in cities in Brazil, which are global centers of excellence for the alternative investment management industry. The revenues of these service providers, including the investment managers, depend on the fees generated by the management of the global pools of capital gathered in the Cayman Islands. This income creates additional jobs and taxable income in Brazil and helps preserve the position of Brazilian cities as premier financial centers by giving managers based in Brazil the ability to manage global capital that would not otherwise be invested in the country. Brazil.

The UK-based Alternative Investment Management Association (AIMA) noted that money invested in offshore funds like those in the Cayman Islands is not kept in an offshore bank but invested in financial markets around the world. He added that this activity helps provide additional sources of finance for businesses and infrastructure projects in places like the UK, creating important jobs and generating tax revenue for the government of that country. [‘Transparent,
Sophisticated, Tax Neutral: The Truth About Offshore Funds’
– AIMA Report Nov 2017
]

Although Cayman does not add any additional taxes to financial services transactions within its jurisdiction, investors (individuals and businesses) are still subject to all taxes owed in their country. This is guaranteed by meeting or exceeding all globally accepted standards for transparency and cross-border cooperation with tax and law enforcement authorities, including the Cayman Islands, which quickly adopted the framework of the standard. common OECD declaration. This is in addition to the MOUs and TIEA that Cayman has with Brazil.

The importance of Cayman’s tax neutral status can be illustrated by considering what would happen if Cayman introduced a direct tax on corporate profits, such as hedge funds. This would reduce the returns for Brazilian investors in these funds and, therefore, reduce the taxes these investors would in turn be required to pay at home in Brazil. As a result, Cayman’s tax-neutral and efficient platform delivers the optimal outcome for investors, corporate issuers and tax jurisdictions in the home country.

Click here to continue reading. . .

Originally published in November 2019

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.


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