Those looking to benefit from the favourable stamp duty treatment facilitated by developers who offer property in the Cayman Islands as part of a land purchase and development contract package will need to act quickly if they want to beat the changes proposed in The Stamp Duty (Amendment) Bill 2018 (‘Bill’). To take advantage of the current arrangements you will need to enter into these contracts by no later than 31 December 2018. Developers who have previously sought to utilise the current law as part of their offering to potential buyers will also need to take note of the proposed changes.

How is stamp duty applied to property purchases?

Generally, you can expect to pay stamp duty at a rate of 7.5% on the purchase of real estate, whether it be undeveloped ‘raw’ land, or developed land with buildings on it. Concessional rates and waivers are available in certain circumstances for Caymanian first-time property buyers.

Historically, some developers have sought to minimise stamp duty payable by their clients by structuring their contracts in two interdependent parts: a contract for the sale of raw land on which the building will be constructed; and a development or construction contract to be carried out by the developer or a related company.

Under the current law, structuring the deal in this way has resulted in stamp duty being assessed against the value of the raw land only, without taking into account the value of the building that the developer has agreed to construct on the land, provided that the agreement for sale is presented to the Lands and Survey Department for assessment before any work has been carried out on the land.

What will change under the proposed law?

Assuming the Bill is passed unamended, this favourable stamp duty treatment will no longer be available from 1 January 2019, as the two contracts will be considered a ‘linked property transaction’, with stamp duty being assessed on the aggregate value of the contracts.

The Bill proposes that where the total value of the property in such linked property transactions exceeds CI$300,000 it will attract stamp duty at a rate of 7.5% on the total value (i.e. the value of the raw land plus the building, once constructed). This will be payable in two instalments of 3.75% each, with the first being payable within 45 days of the agreement being entered into, and the second when the ultimate conveyance or transfer is signed by the buyer.

Discounts for lower value developments

The Bill proposes that if the total value of the land and the proposed building, which together constitute a linked property transaction, does not exceed CI$300,000 then stamp duty will be payable at a discounted rate of 3%.

When will this take effect?

Assuming the Bill makes it through the Cayman Islands Legislative Assembly unchanged, the new provisions will take effect from 1 January 2019, giving investors and property developers a few months to prepare.

Solomon Harris

Whether you are interested in buying property in the Cayman Islands or looking for advice on how the changes to linked property transactions will affect your development, Solomon Harris has many years’ experience in all legal matters on the purchase of property in the Cayman Islands. Contact Partner Ian Jamieson or our experienced attorneys, Richard Parry and Sophie Warburton, to see how we can help.

Disclaimer
The information contained in this article is necessarily brief and general in nature and does not constitute legal advice. Appropriate legal or other professional advice should be sought for any specific matter.

JOIN OUR MAILING LIST

From time to time our firm hosts or sponsors events of interest to our clients. Please join our mailing list if you would like to be notified of upcoming events.

  • Lawyers World Global Awards Solomon Harris
  • World Finance Awards 2012 Solomon Harris
  • IFLR 1000 2011 Recommended Firm
  • 2011 Acquisition Legal Awards
  • ACQ Law Awards 2011 Solomon Harris
  • Corporate Intl Awards Law Firm of the Year Cayman Islands
  • Deal Makers Global Awards
  • Finance Monthly Global Awards 2012 Solomon Harris
  • Solomon Harris wins IFLR Asia Awards
  • Lawyer Monthly
  • The Lawyer Top 30 Offshore
  • Captive Review's Offshore Firm of the Year award
  • IFLR 1000 2014 Recommended Firm

Solomon Harris is a member of AIMA

Cayman Stamp Duty Bill extends concessions for Caymanian first time buyers...

The Cayman Islands Government has good news for those Caymanians looking to buy their firs...


View All Latest News
  Cayman Islands +1 345 949 0488
  Like Solomon Harris on Facebook Follow Solomon Harris on Twitter +1 Solomon Harris Follow Solomon Harris on LinkedIn Contact Us
Cayman Islands +1 345 949 0488
Like Solomon Harris on Facebook Follow Solomon Harris on Twitter +1 Solomon Harris Follow Solomon Harris on LinkedIn
Contact Us