What is the new stamp duty position on linked transactions in the Cayman Islands?02 Jan 2019
The Stamp Duty (Amendment) Law, 2018 (‘Law’) came into effect in the Cayman Islands on 19 December 2018 introducing Stamp Duty on ‘Linked Property Transactions’ from 31 December 2019. For more information on what constitutes a linked property transaction, please see our briefing entitled Welcome delay in change to Cayman Islands Stamp Duty law gives developers another year before Stamp Duty increase.
What stamp duty is due on Linked Property Transactions?
The Law provides that in a Linked Property Transaction worth more than CI$300,000 (around US$365,000) the total 7.5% duty is payable as follows:
- 3.75% of the total value of the linked transaction, payable within 45 days of the purchaser having signed an Agreement of Purchase and Sale (‘Agreement’); and
- 3.75% of the total value of the linked transaction, payable within 45 days of the purchaser having signed a Transfer of Land (‘Transfer’).
What was the position under the old law?
The previous legislation allowed a purchaser to defer where a purchaser of land who did not have a right to immediate possession had the choice to either:
- Pay stamp duty of CI$100.00 on the Agreement; or
- Pay ad valorem stamp duty based on the price stated in the Agreement.
This would allow a purchaser to defer payment of stamp duty until the Transfer.
The final amount payable would be based on the taxing officer’s assessment based on the market value of the property at the date the Transfer was signed. For those who had paid ad valorem, this was deducted from the final amount due.
Can purchasers still elect to pay on the Agreement?
Yes. There was a concern that the amendment could be interpreted as meaning that a buyer could no longer elect to stamp at $100 under the Agreement and then pay the full 7.5% once title is transferred. This would have put purchasers of linked transactions in a disadvantageous position of being compelled to pay 3.75% of the value of the transaction within 45 days of signing the Agreement. However, we have checked this point with the Cayman Islands Government who have confirmed that this option is unaffected by the Amendment and purchasers are still able to elect to pay $100 for the stamping of the Agreement and then pay the full 7.5% within 45 days of signing the Transfer.