While there are many incentives to buying a property pre-construction, one financial incentive has been the exception under the Cayman Islands Stamp Duty Law.
In the Cayman Islands, a one-time stamp duty tax of 7.5% of the purchase price is required upon purchase of a property and completion of sale. This tax is calculated on the value of the property, non-inclusive of the chattels. Once this stamp tax is paid, there is no recurring annual tax as the Cayman Islands is a tax-neutral jurisdiction. There is a current exception to the law enjoyed by purchasers of pre-construction developments, in that the law only requires these purchasers to pay stamp duty on the value of the raw land rather than the property purchased. This has allowed for substantial savings on the cost of stamp duty for buyers.
Now also included in this exception to the law is OLEA’s condos – this benefit does not usually get extended to condominiums. The developers received approval from the Department of Planning for volumetric subdivision for OLEA, which allows the exception to the law to extend to condo purchasers who will pre-pay the stamp duty on the parcel of air only, rather than the condo’s full value.
However, in 2018 the Government announced an amendment to the stamp duty law that will take effect from 1 January 2020.
What will change?
The law’s exception, which will no longer be available as of the end of this calendar year. Purchasers will be required to pay the 7.5 per cent required by law on the full value of the property they are purchasing, whether or not the property has completed construction.
How will this affect you?
If you are in the market to purchase real estate, we encourage you to buy property before this law comes into effect. Purchasers seeking financing are required to come up with the stamp duty on their own, as lenders do not include this in the mortgage.
How can you benefit from this?
This exception to the law represents significant savings on stamp duty costs for purchasers and is still in place until the end of 2019. Currently, the stamp duty payable on a two-bedroom condo at OLEA, which is in the pre-construction phase, would be based on the land value of US$70,000 rather than the sale price of $849,950, allowing for a savings of over $58,000* in stamp duty payable if you purchase before 1 January, 2020.
For more on this law amendment click here. To find out about purchasing at OLEA and how you can benefit from the law as it stands today, contact us today.
*The figures stated in this blog post are only estimates and are not indicative of confirmed savings. Lands & Survey has the ability to reassess the stamp duty due at closing.