The Cayman Islands Lands and Survey Department issued updated guidance on 7 January 2021 which means purchasers can potentially benefit from stamp duty savings on assignments of purchase agreements where stamp duty has already been paid on the purchase agreement.
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 example, for Caymanian first-time property buyers).
Historically, until the law changed at the end of December 2019, some developers 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 old law, structuring the deal in this way had 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 purchase agreement is presented to the Lands and Survey Department for assessment before any work has been carried out on the land.
Up until recently, the Cayman Islands Lands and Survey Department had indicated that stamp duty paid on a purchase agreement cannot be applied to a future assignment of that purchase agreement. This meant that Lands and Survey would calculate stamp duty based on 7.5% of the market value (or 3% if it was a linked transaction below CI$300,000) of the property regardless of whether stamp duty had been paid on the original purchase agreement.
What does the updated guidance say?
In a move that will be welcomed by developers and purchasers/assignees alike the Cayman Islands Lands and Survey department has issued updated guidance which states:
- Assignments of qualifying purchase agreements by 30 June 2021 with no premium will be charged stamp duty on the assignment in the sum of CI$200 and provided stamp duty has been paid on the qualifying purchase agreement then no further stamp duty is payable on closing.
- Assignments of qualifying purchase agreements by 30 June 2021 with a premium will be charged stamp duty on the assignment at 7.5% of the premium and provided stamp duty has been paid on the qualifying purchase agreement then no further stamp duty is payable on closing.
- Assignments of qualifying purchase agreements after 30 June 2021 with no premium will be charged stamp duty on the assignment in the sum of CI$200 and stamp duty will be payable on closing at 7.5% of total consideration or market value of the property (whichever is the higher).
- Assignments of qualifying purchase agreements after 30 June 2021 with a premium will be charged stamp duty on the assignment in the sum of CI$200 and stamp duty will be payable on closing at 7.5% of total consideration or market value of the property (whichever is the higher).
Whilst the update is silent on this point we suspect that if you take an assignment of a purchase agreement after 30 June 2021 and it is a linked transaction with a total consideration or market value below CI$300,000.00 then stamp duty will still be payable at 3%.
What does this mean in practice?
This means where a party has paid stamp duty on a purchase agreement then subject to certain requirements as set out above the purchase agreement can be assigned to a third party and on closing no further stamp duty will be payable on the transfer of land. However, please note the assignment must be completed on or before 30 June 2021 and where a premium is charged, stamp duty will be charged at 7.5% of that premium.
If you would like any further information, please get in touch with your usual Bedell Cristin contact or one of the contacts listed.
Location: Cayman Islands
Related Service: Real Estate & Property
