(CMR) The Government is proposing changes to the Stamp Duty Law (20013 Revision) that will focus on helping first-time property buyers and low-income members of the public. The bill was made available this week and is seen as a welcomed change for many struggling to become first-time homeowners.
The allowed concessions for Caymanians purchasing their first home will be in increased from $100,000 to $150,000 on raw land. Existing properties will be increased from $300,000 to $400,000.
At the same time, the government is closing a loophole it states that developers use to minimize paying stamp duty. Any increase in revenue that results from this measure can be used for needed infrastructure projects and other programs
The government has proposed 1 January 2019 as the start date for the amendments.
The Stamp Duty (Amendment) Bill, 2018, which was gazetted today (Wednesday, 24 October 2018), is slated for consideration, debate, and voting in the coming November Meeting of the House.
Now with the amending bill, the Government seeks to further help Caymanians as follows:
increase by $50,000 the current stamp duty concession threshold from $100,000 to $150,000 with respect to Caymanians making their first property purchase, in the form of raw land; this means they will not pay any stamp duty for purchasing such property priced up to $150,000;
raise by $100,000 the threshold from $300,000 to $400,000 for the first time purchase or construction of an apartment, condo or house by Caymanians; this means they are exempt from paying Government stamp duty for acquisitions up to $400,000;
Caymanians making their first property purchase as raw land over $150,000 but less than $200,000 will also get a concession – they will pay only 2% stamp duty on such property;
similarly, for Caymanians making their first purchase of property that has a building on it, with a value that is greater than $400,000 but less than $500,000, stamp duty is payable at 2%; and
the bill also introduces concessions for two or more Caymanians (but not more than 10) buying property for the first time: if the value of the property with a building on it does not exceed $500,000, then there is no stamp duty to pay; and if property being purchased is raw land with a value under $300,000, then there is again no stamp duty to pay. The bill also specifies a 2% rate of stamp duty for acquisitions with a built-up property that does not exceed $600,000 and $350,000 for raw land.
Minister for Finance and Economic Development, Hon. Roy McTaggart explained,
“We are willing to forego revenue to ensure that the financially disadvantaged, as well as young Caymanian families starting out in life, get a further break. This is also Government's way oftrying to help all lower-income persons in the Cayman Islands attain property ownership”.
Additionally, the amending bill addresses an increasingly used practice that some property developers have employed by insisting that the buyers of raw land, who purchase their land from those developers, have to use the same developers to construct their dwellings.
This situation of “linked property transactions” has resulted in stamp duty being paid only on the value of the raw land as opposed to stamp duty being paid on the greater value of the property once the dwelling has been completed. This practice has resulted in significant revenue loss for the Government.
With the amending bill, it is proposed that such linked property transactions, where the value of the property exceeds $300,000, will attract a stamp duty rate of 7.5%.
“We are closing the loophole whereby some property developers have sought to minimise stamp duty charges. The practice has resulted in a very material loss of revenue due to Government – revenue that we can invest in areas such as much needed infrastructure projects, as well as social programmes to help the most vulnerable members of our community,”
Minister McTaggart elaborated.
Nevertheless, even in the case of a linked property transaction, if the value of the property with a dwelling on it does not exceed $300,000, the stamp duty payable is only 3% for both Caymanians purchasing property at least for the second time and non-Caymanians.
Again for Caymanian first time buyers, in a linked property transaction with the purchase price not exceeding $300,000, the First-Time Caymanian Property Ownership Concession Programme will kick in, exempting them from paying any duty. If the property purchase exceeds $300,000 but is below $500,000, the first time Caymanian buyer will pay either 0% stamp duty (if the value does not exceed $400,000) or 2% (if the value exceeds $400,000 but not $500,000).
The proposals will take effect from 1 January 2019, giving property developers involved a few months to prepare for them, if passed in the House.
Furthermore, to prevent the payments becoming onerous, in a linked property transaction in which the value of the transaction exceeds $300,000, stamp duty is due at the 7.5% rate but, it can be paid in two installments of 3.75%, each tranche.