Cayman Stamp Duty: Do you Qualify for a Concession or Waiver?

Purchasing property in the Cayman Islands is attractive, not only for the luxurious beaches and high standard of living but the buying process is acclaimed for its structure and variety of opportunities.

HSM’s property lawyers in the Cayman Islands breakdown the fees that buyers can expect.

There are no property taxes in the Cayman Islands but property buyers do pay stamp duty. Generally, stamp duty is payable at a rate of 7.5% on the market value of property, whether undeveloped ‘raw’ land or developed land with buildings on it. However, concessions or waivers may be available in the following circumstances:

a) First time Caymanian Purchasers

Where a purchaser is Caymanian,[1] reduced stamp duty rates may be available for the purchase of an existing residential dwelling, or raw land for the construction of a residential dwelling[2]. This concession is not automatic; an application must be made to the Minister of Finance. If approved, the following reduced rates apply for one Caymanian first-time purchaser: [3]

• (i) 0% for bare land purchases with a market value of up to CI$150,000 and for houses, apartments or other dwelling purchases with a market value of up to CI$400,000, for owner occupation; and
• (ii) 2% for bare land purchases with a market value of more than CI$150,000 but not exceeding CI$200,000 and for houses, apartments or other dwelling purchases with a Market Value of more than CI$400,000 but not exceeding CI$500,000, for owner occupation.

The following reduced rates apply for two or more[4] Caymanian first time purchasers:

• (i) 0% for bare land purchases with a market value of up to CI$300,000 and for houses, apartments or other dwelling purchases with a market value of up to CI$500,000, for owner occupation; and
• (ii) 2% for bare land purchases with a market value of more than CI$300,000 but not exceeding CI$350,000 and for houses, apartments or other dwelling purchases with a Market Value of more than CI$500,000 but not exceeding CI$600,000, for owner occupation.

The usual 7.5% applies to purchases exceeding the above limits.

b) Transfers through Natural Love and Affection

For transactions which take place through Natural Love and Affection (i.e. no consideration, financial or otherwise, passes between the parties), a fixed stamp duty rate of CI$50[5] applies. Property may pass for natural love and affection between:

• Husband and Wife;
• Parent and Child;
• Brother and Sister (as long as they share a parent); and
• Grandparent and Grandchild.

It is also possible for property to pass for natural love and affection between extended family members in a single transaction, as long as evidence of the relationship chain can be demonstrated and the parties are living.  In such cases, the Stamp Duty is payable separately for each link in the relationship chain.

c) Linked Transactions/ Pre-construction/ Developments

Historically, many developers have minimized the stamp duty payable by their clients by structuring their contracts in two interdependent parts: an agreement for the sale of raw land on which the building will be constructed; and a development or construction agreement to be carried out by the developer or a related company.

Accordingly, the stamp duty is assessed on the value of the raw land only, without taking into account the value of the building the developer has agreed to construct on, provided that the agreement for sale is presented to the Lands and Survey Department for assessment before the building commences.

Changes on the horizon?

In October 2018, the Stamp Duty (Amendment) Bill 2018 (the ‘Bill’) was published. The Bill proposed that as of 1 January 2019 such transactions would be considered ‘linked property transactions’, and stamp duty would be assessed on the aggregate value of the two agreements.

What has actually changed?

However, when the Stamp Duty (Amendment) Law 2018 came into force on 19 December 2018, the draft legislation had been significantly altered with respect to ‘linked property transactions’, allowing developers with planning permission in place by 30 June 2019 a year to take advantage of the pre-existing regime for stamp duty on ‘linked property transactions’, provided they enter into their contracts before 31 December 2019. Accordingly, stamp duty will be assessed on the value of the land purchase agreement only and not on the value of the construction agreement as well.

This has allowed developers more time to prepare for the impact of the new regime and is a welcome delay for both developers and purchasers with residential development projects already underway.

What about after 31 December 2019?

The Law provides that, after 31 December 2019, in a Linked Property Transaction worth CI$300,000 or less, the stamp duty payable is 3% of the total value of the linked property transaction.[6]

In a Linked Property Transaction worth more than CI$300,000 the total 7.5% stamp duty is payable as follows:[7]

• (i) 75% of the total value of the linked transaction, payable within 45 days of the purchaser having signed an Agreement for Sale and Purchase (‘Agreement’); and
• (ii) 75% of the total value of the linked transaction, payable within 45 days of the purchaser having signed a Transfer of Land (‘Transfer’).

d) Transfers through the death of an owner, or subsequent divestment of estate

No stamp duty is payable on transactions that are effected as a result of the death of a proprietor/ owner of a land, where the land is being inherited either directly, or otherwise dealt with by way of the Administrator of the Estate.

e) Transfers between Companies and Shareholders

For transfers from a landholding company to a shareholder owning at least 45% of the shares (or vice versa), an abatement of stamp duty may also be available.[8]

f) Other

Several other categories of transfers may also be exempt from stamp duty, including:

• transfers to a receiver;[9]
• transfers executed by a cooperative society;[10] and
• certain dealings in bankruptcy.[11]

Footnotes

[1] As defined under the Immigration (Transition) Law, 2018 and only if they can provide supporting documentation.

[2] This only applies when the land or property is for the applicant’s first owner occupied dwelling.

[3] This applies to all areas except parcels located in excepted Blocks – see the Schedule to the Stamp Duty Law (2019 Revision) for a list.

[4] But no more than 10.

[5] For extended family members, the Stamp Duty fee applies separately to each ‘link’ in the relationship chain.

[6] CONVEYANCE OR TRANSFER of any immovable property within a development scheme and forming part of a linked property transaction, para (1) Schedule, Stamp Duty Law (2019 Revision)

[7] CONVEYANCE OR TRANSFER of any immovable property within a development scheme and forming part of a linked property transaction, paras. (2), (3) and (4) Schedule, Stamp Duty Law (2019 Revision)

[8] CONVEYANCE OR TRANSFER, para (3), Schedule, Stamp Duty Law (2019 Revision)

[9] CONVEYANCE OR TRANSFER, para (5), Schedule, Stamp Duty Law (2019 Revision)

[10] s.67 Cooperative Societies Law (2001 Revision)

[11] s.166 Bankruptcy Law (1997 Revision)