The Cayman Islands government has proposed an increase in stamp duty on the sale of Cayman Islands real estate to 7.5 per cent of the purchase consideration (or of the market value if higher) across the board wherever the property is situated in the Islands.
Under the current stamp duty regime, Caymanians and non-Caymanians pay different rates of duty (4 per cent and 6 per cent, respectively) in those parts of the Islands excluding the Seven Mile Beach corridor and certain areas in George Town. In the Seven Mile Beach corridor and certain areas in George Town, the rate is already 7.5 per cent across the board. Under the new proposals the 7.5 per cent rate would apply to everyone no matter where the property is located. However, the government is 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 CI$100,000 or houses or condominiums up to CI$300,000; and stamp duty of 2 per cent on vacant land between CI$100,000 and CI$150,000 and on houses or condominiums between CI$300,000 and CI$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 would now be required to pay 7.5 per cent instead of 4 per cent. Non-Caymanians, who were paying 6 per cent duty, will also pay 7.5 per cent. This is not a new scenario for the Cayman Islands as in the last 10 years the stamp duty rates have increased and decreased several times and the question arises whether there is some way to pay duty now before the higher rate comes into effect. 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 conform to one another i.e. same parties, same price, same property. In the past, the practice of the Government Valuation Department has been that where a purchase agreement is submitted and stamp duty paid prior to the date that the stamp duty rate is increased, and the purchase is not completed until after the date on which the increase becomes effective, the Valuation Department will not reassess or ask for additional duty even though the rates have changed between the date of agreement and date of completion. Note however that 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. For example, this could occur in a situation where you have paid the duty on your agreement, and then your financing falls through and as a result you cannot complete the purchase. You would then not be able to recover the amount of duty that you had prepaid on the purchase agreement. You should therefore always seek the advice of an attorney before paying stamp duty in advance of closing.
For legal assistance in connection with the above or with any other Cayman Islands real estate matter please contact Buck Grizzel.