By Michael Sharvin
As attorneys, we are often asked questions about the stamp duty that is payable on real estate property sales and leases. Below are some of the most common questions we are asked.
What is stamp duty?
Stamp duty is a one-time tax that is paid to the Cayman Islands Government, usually by the purchaser.
How and when is stamp duty assessed?
Stamp duty is assessed when the transfer of property documents are presented for registration at the Cayman Islands Land Registry. The Cayman Islands Government will then assess the market value of the property to ensure that it is receiving the correct amount of stamp duty.
At what rate is stamp duty charged?
On real estate transactions, stamp duty is payable at a prescribed rate — usually 7.5% of the market value of a property or the price paid, whichever is the higher. However, concessions and waivers may be available in certain circumstances. For example, there is no stamp duty payable for a first-time Caymanian buyer who purchases a dwelling for CI$400,000 or less or bare land for CI$150,000 or less. Other specific discounts and waivers can apply. When in doubt, seek advice from an attorney.
In addition, stamp duty is payable on mortgages at a rate of 1% or 1.5%, depending on the amount borrowed.
How does the process work?
After closing on a real estate transaction and the subsequent filing of transfer documents with Land Registry, the purchaser's attorney will usually pay the stamp duty on behalf of the purchaser. Stamp duty must be paid within 45 days of signing the transfer documents or late payment fees and interest will be charged.
Are there any deductions allowed?
For the purpose of calculating stamp duty, the value of any chattels included in the sale can be deducted from the purchase price. Your attorney would need to include wording in the transfer of land documents and enclose a chattels list that has been signed by the seller and purchaser with the application for registration at Land Registry.
Is stamp duty payable on leases?
Stamp duty is payable on leases of residential and commercial properties. For leases where the term is less than a year, a rate of 5% of the total rent is payable. Where the term of the lease exceeds five years but does not exceed 10 years, the stamp duty will be 10% of the average rent. The stamp duty rate increases up to 20% of the average rent for leases with a term of more than 10 years up to a term of 30 years. For leases exceeding 30 years, the duty is the same as on a transfer of land.
This article first appeared in the September 2020 print edition of Camana Bay Times with the headline "The basics of stamp duty."
Michael Sharvin is a senior associate on the real estate team of the law firm Bedell Cristin in Camana Bay.