Tag: stamp duty

Cayman Islands Stamp Duty: Explained

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.  

First Time Caymanian Buyer?

Depending on the location of the property you wish to buy, as a First-Time Caymanian Buyer, you may be eligible for a reduced rate of stamp duty or, even better, a total stamp duty exemption!

Updates to the Stamp Duty Law in January 2019 took the threshold for the First-Time Caymanian Buyer concession from CI$300,000 to CI$400,000 for homes, and the threshold for ‘raw’ undeveloped land from CI$100,000 to CI$150,000.

Yusssss, we hear you shout! Well, there is a little more to it and we’d certainly recommend you seek legal advice once ready to begin. To get you started, we’ve put together a quick summary on Stamp Duty 101.

Here goes…

BASIC STAMP DUTY RULES

Normally, on every property purchase, a stamp duty is paid to the Cayman Islands Government at a rate of 7.5% of the value of the property or land.  E.g. if the property is CI$200,000, then CI$15,000 extra will be owed on closing (on top of your purchase price and mortgage down payment). It’s important to be aware that the banks who lend you the money to buy your home will not allow you to add the stamp duty fee to your mortgage.

 

CONCESSION ELIGIBILITY

First things first, you’ve got to be Caymanian (and we know this in itself can be complicated!). It’s advisable to make an application to the Minister of Finance’s office at the Government Administration Building prior to your property purchase to ensure your eligibility. (See link below)

You will need to prove that you are Caymanian and if you are applying with your spouse then you will need to provide a certified copy of the marriage certificate.  A sworn affidavit signed by a Notary Public or Justice of the Peace is required together with a copy of the land register of the property you want to purchase and recent private sector valuation report (within last six months from an approved valuation survey) proving the value of the land.

 

EXCEPTIONS

There are some exceptions that a first-time Caymanian buyer needs to be aware of when selecting potential properties to buy. Certain land or property located in the Seven Mile Beach corridor and in George Town will not qualify for the stamp duty waiver; the full 7.5% stamp duty would be due.

Also, be aware that stamp duty exemptions do not apply to overseas first-time buyers. Interests in property held in the name of a company also do not qualify for reduced rates of stamp duty, regardless of the ownership of the company.

 

THE RATES AND REQUIREMENTS

Caymanian buyers may qualify for a reduced rate of stamp duty but only when the land or property is for your first owner-occupied dwelling and providing that the market value is below certain CI$ thresholds.

Simply put, to be eligible for the stamp duty exemption:

 

CURRENTLY

To be eligible for full stamp duty exemption:

Land – current market value of raw, undeveloped land cannot exceed CI$150,000
Property – current market value of building and land cannot exceed CI$400,000

To be eligible for 2% exemption:

Land – current market value of land must be over CI$150,000 but not exceed CI$200,000
Property – current market value of building and land must be over CI$400,000 but not exceed CI$500,000

The specific rates of duty applicable together with application requirements can be found here: CNS Library

 

MARRIED?

Caymanian spouses: If a husband and wife who are both Caymanian first-time homeowner have been approved for stamp duty waiver and are taking title in both of their names, then they will effectively ‘use up’ both of their waivers on the purchase. If either spouse takes title in their name solely, then their spouse’s waiver may be used for another property purchase.

Caymanian and non-Caymanian spouse: If a husband and wife intend to take title in both of their names and only one spouse is Caymanian, then the stamp duty waiver will only be eligible on 50% of the current market value of the property. The non-Caymanian spouse will be required to pay the standard 7.5% stamp duty fees on 50% of the purchase price.

 

DON’T FORGET…

Stamp duty waivers also cannot be used partially or split between property purchases.

Once title has been taken, there is a restriction placed on the land register preventing the owner(s) from transferring title to the property for a five-year period. That means you won’t want to sell your home for five years after purchase or you’ll risk having to pay the full stamp duty owed. Any transfer of title which holds the restriction requires the consent from the Financial Secretary to remove or lift the restriction.

Don’t forget, team Property Cayman is able to advise you on ANY property on island, no matter if you discover it via CIREBA, Ecay, or private sale. We can help guide you through the process as our team of agents have over 20 years’ experience in the Cayman Islands real estate market. Even more importantly, we care about connecting good people with great places!

All you have to do is get in touch. Don’t worry, it’s free of charge; all we ask is that you trust us to do our job – to help you find your perfect home!

We look forward to helping you on your property journey.

Updated on 4 Nov 2019