The Cayman Islands government’s newest revenue raising measures include a proposal to increase stamp duty on the sale of real estate to 7.5 percent.

The current situation means Caymanians and non-Caymanians pay different rates of duty (4 percent and 6 percent, respectively, excluding waterfront properties along the Seven Mile Beach corridor and certain areas in George Town in which the rate is 7.5 percent).  The new plans mean the 7.5 percent rate would apply to everyone regardless of the property’s location. To put it into historical perspective, stamp duty rates for non-SMB properties have not been this high for over 10 years, prior to November 2001. In fact, from November 2001 to July 2006 the rate was 5 percent across the board.

The government intends to provide some limited relief by also proposing to increase the values for stamp duty concessions for first time Caymanian buyers as follows:

*No stamp duty on vacant land up to $100,000 or houses or condos up to $300,000;

*Stamp duty of 2 percent on land between $100,000 and $150,000 along with houses or condos valued between $300,000 and $400,000.

There are obviously a significant number of Caymanians who are not first time buyers or who are buying properties at prices higher than the above thresholds.

These persons will now be required to pay 7.5 percent instead of 4 percent, an increase of 88 per cent.  Non-Caymanians, who were paying 6 percent duty, will pay 7.5 percent, only a 25 percent increase.

It is possible to pay stamp duty on a purchase agreement and then pay no stamp duty on the subsequent transfer of land where the agreement and transfer are the identical, i.e. same parties, same price, and same property. Previously, the practice of the Government Valuation Department has been that where a purchase agreement has been submitted and stamp duty paid prior to the date that the rate of stamp duty is increased, and the purchase is not completed until after the increase becomes effective, the Valuation Department has not reassessed or asked for additional duty even though the change occurred between the date of agreement and date of completion.

There are, however, a number of different scenarios which can arise regarding paying duty in advance of closing, and the issues can become complex when you factor in the various applicable laws and government departments which have a role in collecting duty.  If for some reason your purchase does not complete, then you cannot obtain a refund of the stamp duty that you have paid on the purchase agreement. You would then be out the amount of duty that you had prepaid on the purchase agreement.

As with any real estate transaction, it is highly recommended that you seek legal advice before paying stamp duty.

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