Joins exodus from Cayman
GPS navigation product manufacturer
Garmin announced plans to move its place of incorporation from Cayman to
Due to the proposed move Garmin is
paying its annual dividend, declared at $1.50 per share, in April instead of
Garmin’s plans mirror those of at
least three other companies, XL Capital, United America Indemnity and Seagate, which
are also domiciled in Cayman and have declared since the beginning of the year
that they will re-domesticate to a European location.
Although all of the companies have
no direct employees in the Cayman Islands, the transactions indicate major
reputational problems and tax risks for companies that maintain a registered
company seat in Cayman but operate in the US.
In a preliminary proxy filing with
the US Securities and Exchange Commission Garmin lays out similar and in some
cases identical arguments for leaving Cayman to those of the other companies
that intend to re-domicile.
The company said that Garmin would
benefit from Switzerland’s global reputation for financial and political
stability and secure the firm’s ability to maintain a competitive worldwide
effective tax rate.
“We also believe this could make
Garmin Switzerland a more attractive investment alternative than Garmin
Cayman,” the firm added.
Garmin further mentioned the
negative publicity that companies based in low tax jurisdictions, such as the
Cayman Islands, have recently received as well as the lack of a “substantial
network of tax treaties with the countries where we have operations” as factors
for the move.
The company explicitly refrained
from commenting “on the fairness of that negative publicity” in its proxy
Garmin argued that several legislative proposals
in the US could potentially increase the firm’s tax burden if it remained
incorporated in the Cayman Islands.
While there is no certainty that
the legislation in question will effectively be passed or have a negative tax
effect for companies registered in Cayman, “the board considers that the
current risks associated with potential legislative reforms are, of themselves,
sufficient reason to propose and recommend the [r]e-domestication,” the firm
stated in its SEC filing.
The proposed move has already been
approved by Garmin’s board and is scheduled for a shareholder vote on 20 May. Provided
there are no objections from shareholders and the Cayman Islands Grand Court,
the move is expected to become effective on 27 June.