Last Friday, Jan 16, 2015, Hong Kong billionaire Li Ka-shing announced a sweeping reshuffle of his business empire and the switch of incorporation base from Hong Kong to Cayman Islands, in a bid to boost their value and attract more investors.

The reshuffle proposal suggested that the two conglomerates under Li's control, Cheung Kong Holdings and Hutchison Whampoa, will merge and reconstruct, forming two new companies, CK Hutchison Holdings (CKH) and Cheung Kong Property Holdings (CK Property). The two new companies, one focusing on property and the other on telecoms, retail and energy, will be incorporated in Cayman Islands and listed in Hong Kong.

Why did Li Ka-Shing choose Cayman Islands? He stressed at a press conference that the move was for the sake of convenience to do business, dispelling speculations that the plan to incorporate the new companies in Cayman Islands rather than Hong Kong is a sign of withdrawal. However, another reason can be easily told—the tax haven status of the Cayman Islands.

The Cayman Islands is well-known as a tax haven. It does not tax offshore companies on income earned outside of the territory.  It has no taxation system in place for International business companies. Offshore corporations incorporated in the Cayman Islands do not need to pay income tax or corporate taxes on capital gained abroad. Cayman Islands trust and offshore business entities are exempted from paying Stamp Duty for transaction done on behalf of the two. There is no capital gains tax, income tax, corporate tax, estate tax, gift tax, withholding tax and inheritance tax applied in the offshore tax haven of the Cayman Islands.

The Cayman Islands makes incorporating offshore companies very easy and confidential. When incorporating there is no need to reveal the identity of the true owners of Cayman Islands offshore Company. The names of the beneficial owners of Cayman offshore companies are not filed as public record. Offshore companies legislation of the Cayman Islands provides a further layer of privacy by allowing the services of nominee shareholders and directors to be used for corporation. Only one shareholder and one director are needed for company incorporation. The shareholder and director of a Cayman offshore company can be the same natural person. The Cayman Islands became a popular a popular offshore tax haven because it provided privacy and confidentiality to its clients.

The Cayman Islands is home to some of the world’s most trusted offshore financial institutes. As a tax haven providing offshore banking and banking services, it has put some very strict banking privacy laws in place to protect its clients. International banking requires that all banks know the clients that they take on. In the Cayman Islands it is illegal for a person to give out information concerning offshore bank account holder or offshore bank accounts without the permission of the bank account holder. Unauthorized disclosure of offshore bank information can result in strict fine which can result with the perpetrator facing a prison term.

The Cayman Islands has not signed any double tax treaties with any foreign nations. That means the financial status of offshore corporation’s owners and other offshore clients are safe from the tax authorities of their respective countries. Offshore companies incorporated in the Cayman Islands are not mandated by law to report their annual financial reports to any authorities present on the jurisdiction. Company’s accounts are kept for their benefit and at any location convenient to them. In the Cayman Islands there is no exchange controls in place. That is, there is no need to declare source of funds. The absence of exchange controls law in place makes it easier for corporations to move funds from the Cayman Islands to other locations which are very beneficial to those offshore companies which engage in trade and investment activities on the global market. The Cayman Islands offshore sector was designed to present a flexible environment for offshore entities.