We get asked a lot about the Stamp Duty Law, and for good reason. With changes to the Stamp Duty Laws coming into effect on January 1, 2020, we wanted to break things down and answer some FAQs we get on the topic.
In short, stamp duty is a one-time tax paid to the CI Government on all real estate transfers in the Cayman Islands. It’s a flat rate of 7.5% of the purchase price of the property, less the value of any chattels (furniture and appliances). This may seem steep, however it’s worth noting that this is the only tax you will ever pay on your property. The Cayman Islands have:
- Zero annual property taxes
- Zero capital gains taxes
- Zero inheritance taxes
- Zero state/council taxes
(N.B. If you are a foreign citizen, we advise seeking guidance)
1. What will the stamp duty changes be effective Jan 1, 2020?
As we understand it, the changes to the Stamp Duty Law will affect purchasers looking to buy pre-construction properties. Currently, for certain developments that received Planning Approval prior to June 30, 2019, buyers are able to pay a significantly reduced amount of stamp duty calculated on the air space that their future apartment will occupy (aka the ‘volumetric air parcel’),or calculated on the raw land footprint that the townhouse/apartment occupies. This is opposed to paying the stamp duty on the full purchase price.
If you are reading this and are interested in buying pre-construction, we urge you to do so before Dec 31, 2019; you could save yourself tens if not hundreds of thousands of dollars. Click the respective links to view several pre-construction options we have available at One Canal Point, Dolphin Point Club, and Indigo Bay. Alternatively, feel free to reach out to us for more information.
2. How and when do I pay Stamp Duty?
Assuming you are buying an ‘existing’ (already built) property and are using mortgage financing for the purchase, your stamp duty will be paid at closing – your attorney will be able to guide you through this process.
If you’re purchasing a property with cash, you have 45 days to head to the Government Admin building to make your payment otherwise you face penalty charges.
If you’ve already purchased a pre-construction condo, you may be able to save some money by paying your stamp duty ASAP. If the development you purchased into received its Planning Permission before June 30, 2019, you’re able to pay stamp duty on the value of the volumetric air parcel your condo will one day occupy, as we illustrated above. We would recommend getting in touch with your developer to discuss your options.
3. Does the Stamp Duty rate vary depending on the location or price of the property I want to buy?
No. Stamp duty is assessed at 7.5% of the purchase price (less value of chattels) of the property, unless you are a first-time Caymanian buyer.
4. How do I calculate Stamp Duty on an existing property?
As mentioned above, stamp duty is only levied on the physical property itself and does apply to the chattels (furniture and appliance). For example, if you purchase a condo for $500,000 and the list of chattels included in the sale totals $25,000, the stamp duty calculation would be 7.5% x $475,000 = CI$35,625.
5. My father wants to give me a piece of land, do I pay Stamp Duty on this?
Technically, no. This would be considered a transfer made out of ‘Natural love and affection’… aww, thanks Dad! The standard 7.5% stamp duty does not apply here, however the Lands & Survey Department will charge a nominal flat fee of CI$50 irrespective of the value of the gifted property.
With that said, if you’re Caymanian and have never purchased property before, this gift from your family would likely disqualify you from your first-time Caymanian home buyer stamp duty waiver. For more information about purchasing your first home as a Caymanian, check out the blog post we wrote about it here.
6. My friend needs to sell their house quickly and has offered it to me for below market value, do I pay stamp duty on this?
Yes, the regular 7.5% rules would apply here. Note however, that whilst you may be getting a ‘deal’ on the property, our friends at Lands & Survey reserve the right to reassess the value of your property if they deem it to have been sold for less than the going rate. In this case, you may have to pay the full 7.5% stamp duty on whichever value is higher – the purchase price, or the re-assessed value.
7. Can I include the Stamp Duty costs in my mortgage loan?
Probably not. Banks in Cayman will generally only lend you enough for 70% – 95% of the property’s value and prefer that you to have enough cash to cover both the down payment & stamp duty payment. In short, they want to see that you have skin in the game. You ‘may’ be able to take out a separate line of credit to cover your stamp duty, however this will be dependent of your equity and ability to service all your loans. An alternative option would be to use a withdrawal from your pension to contribute towards your closing costs, more on this to come.
We hope the above was helpful to you. Still have a stamp duty question that wasn’t covered? Want some general advice on buying property in Cayman? Get in touch! It’s free of charge, and every member of Property Cayman is happy to help you on your property journey.