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26 March 2020
In late 2018 the Stamp Duty Law (Revised) was amended,(1) "in order to eliminate the growing practice of reducing stamp duty due to the Government by means of linked property transactions [LPTs]".(2) Essentially, the reason for introducing the LPT provisions was to ensure that stamp duty is calculated on the total value of the raw land and the dwelling constructed on that land in the case of an LPT "where a development scheme links the purchase of the raw land with the subsequent construction of a dwelling".(3)
Stamp duty is a charge on instruments,(4) not transactions. The Stamp Duty Law sets out the classes of instrument that attract duty (each referred to as a 'head of duty').
The LPT provisions added a new head of duty – namely, conveyance or transfer of any immovable property within a development scheme and forming part of an LPT (the LPT head of duty).
There was, and continues to be, another conveyance head of duty – namely, conveyance or transfer of any immovable property (the ordinary conveyance head of duty). The concessional rates of stamp duty for first-time Caymanian buyers appear in Paragraphs 10 and 11 of this head of duty.(5)
The short answer is yes, for the reasons below.
The concessions for Caymanian first-time buyers appear in the ordinary conveyance head of duty; they are not mentioned in the LPT head of duty. This fact has led to speculation that such concessions do not apply to LPTs. However, this was not the Legislative Assembly's intention, as is plainly evident from the second-reading speech of the minister of public finance and economic development, who moved that the Stamp Duty (Amendment) Bill 2018 be read a second time.
While Cayman cases caution the use of reports of proceedings in the Legislative Assembly, including Hansard,(6) as an aid to statutory interpretation, it is clear that such recourse is appropriate here.(7) Further, there are objective indicators that the Legislative Assembly did not intend to remove the Caymanian first-time buyers' concessions from LPTs, which include the following:
Hence, an LPT is to be assessed for duty under the ordinary conveyance head of duty, as read subject to the LPT head of duty.
The LPT head of duty applies to an instrument that effects a conveyance or transfer of immovable property(8) within a development scheme and when forming part of an LPT.
Therefore, the concepts of a development scheme and an LPT are key to the application of this head of duty.
The first thing to note about the concept of a development scheme is that the LPT head of duty applies only to new constructions. The definition has two limbs: one which applies to "a scheme where there is planning approval relating to land for the construction of buildings" (Limb B) and another which applies to:
a scheme —
(i) to develop land by a seller ('the developer') where bare land is sold by that developer to any person ('the buyer'); and
(ii) there is a building agreement or any other similar agreement between the developer and the buyer that the developer or a connected person of the developer will develop that bare land into a house, strata condominium or other building for that buyer or a connected person of that buyer.
Put simply, the above limb (Limb A) applies to a scheme where there is an agreement to purchase bare land coupled with an agreement between the developer and the buyer (or their connected persons)(9) to develop that land into a dwelling. Limb B does not require such linkage between an agreement to purchase and an agreement to develop, but the concept of LPT, which must also be satisfied for the LPT head of duty to apply, does require a linkage of more than one transaction.
The definition of an 'LPT' has four separate elements, all of which must be satisfied. Specifically, an LPT means that:
(a) there are more than one transaction relating to the conveyancing and transfer of immovable property;
(b) the transactions are between the same buyer and seller ("the developer") or between their connected persons;
(c) payment on each transaction can be made in one payment or divided into two or more payments; and
(d) the transactions are part of a single arrangement or development scheme or part of a series of transactions.
The important elements are points A and B (points C and D merely qualify them). Limb A of the definition of 'development scheme' also satisfies points A and B of the definition of 'LPT'.
Now that the transitional period has expired, attention has turned to the concession under the LPT head of duty. The concession appears as follows:
The charge to duty on a conveyance or transfer of immovable property which is part of a linked property transaction is, where the total value of the linked property transaction is $300,000 or less, 3% of the total value of the linked property transaction. (Emphasis added.)(10)
The following observations may be made about this concession:
Rate of duty
CI$400,000 or less
More than CI$400,000, up to and including CI$500,000
More than CI$500,000
For further information on this topic please contact Sophie Warburton at Ogier by telephone (+1 345 949 9876) or email (firstname.lastname@example.org). The Ogier website can be accessed at www.ogier.com.
(6) See Donette Thompson v The Cayman Islands Health Services Authority 2016 (1) CILR 93, per Williams J, especially at Paragraph 68 and BDO Cayman Ltd v The Governor in Cabinet (unreported, 10 May 2018), per Mangatal J, at Paragraph 123. Each of these decisions cite Pepper v Hart (1993) AC 593, (as qualified in later UK cases) regarding the special rules that govern the use of reports of proceedings in Parliament, including Hansard, as an aid to statutory interpretation. For the latest Cayman case on the use of Hansard, see Carol Angella Bennett v Henry Michael Diaz (unreported, McMillan J, 22 January 2020).
(10) Paragraph 2 sets a rate of 7.5% where the total value of the LPT is more than CI$300,000. Paragraphs 3 and 4 deal with the timing of the payment of duty under Paragraphs 1 and 2, respectively. Finally, Paragraph 5 provides that fixtures are included in the value of immovable property that is chargeable with duty.
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