By Sheline Chandi
Cayman Islands pre-construction properties currently offer a number of incentives for buyers, including the opportunity to buy a property at a preferred price. Another benefit is savings on stamp duty, a tax assessment that is in most instances 7.5 per cent of the higher of the property price or the market value, but on some pre-construction properties is based on the land value only.
However, changes to the Cayman Islands Stamp Duty Law will soon take effect, so buyers have a limited time to take advantage of these potential savings. Shanice Ebanks, a sales specialist with Provenance Properties Cayman Islands, the official Christie’s International Real Estate affiliate on Grand Cayman, answered some questions about the stamp duty payable on property purchases in the Cayman Islands:
CBT: What is stamp duty?
SE: When purchasing property in the Cayman Islands, there is in most circumstances a one-time stamp duty tax payable to the government equal to 7.5 per cent of the purchase price of the property or the market value of the property, whichever is greater. The market value is calculated exclusive of chattels. After paying this one-time tax, there are no recurring property taxes in the Cayman Islands — or income, corporate, sales, capital gains or inheritance taxes for that matter!
CBT: What is the current Cayman Islands law regarding stamp duty payable on pre-construction developments?
SE: There is an element to the law that benefits purchasers of pre-construction developments. In this situation, the purchasers sign two contracts — one to buy the raw land and a second one to have housing constructed on it. By splitting the contract this way, the purchasers are required to pay stamp duty solely on the value of the land, rather than on the value of the improved property. This allows for substantial savings on stamp duty, as the value of land is less than the value of the improved property that will eventually be built.
CBT: How and when will the Stamp Duty Law change?
SE: The government has announced an amendment to the Stamp Duty Law, effective 1 January 2020. Under the new law, a purchaser will be required to pay the full stamp duty on the total purchase price of pre-construction properties.
CBT: How can you benefit from this?
SE: Purchasers of properties that obtained planning approval by 30 June 2019 can continue to take advantage of the existing method for calculating stamp duty on pre-construction properties until 31 December 2019. One of the few pre-construction developments that meet the criteria is OLEA, a 124-residence development in the New Urbanist community of Camana Bay. Although condominium properties do not typically qualify for reduced stamp duty on a pre-construction basis, Dart Real Estate and NCB Group were given approval for a volumetric subdivision for OLEA.
Purchasers who contract to buy an OLEA property by 31 December 2019 will pre-pay the stamp duty on the parcel of air only, rather than the condominium’s full purchase price. These savings are significant. For example, a purchaser of a two-bedroom condo at OLEA would pay tax based on the land value of US$70,000, rather than the sales price of US$849,950, leading to savings of approximately US$58,000. A purchaser of a four-bedroom duplex would save approximately US$142,000 if the property is under contract and stamp duty is paid by 31 December 2019.*
To learn more about purchasing at OLEA call 345.640.OLEA (6532) or email an OLEA sales specialist at firstname.lastname@example.org.
*All figures stated in this article are only estimates and are not indicative of confirmed savings.