Tax is always an important question when considering the ownership and sale of property. Cayman has many desirable aspects with respect to taxes that make investment in Cayman Islands real estate a wise decision.
The primary advantage that Cayman has over the rest of the world is that there are no annual property taxes. In the Cayman Islands there are no regional, state or federal taxes related to property as in the U.S., Canada and the U.K. where there are annual fees related to property ownership. As with the property tax system in most other countries, properties are also re-assessed periodically, often resulting in increases in annual property tax. These increases are of course out of the control of the property owner and makes things difficult from a budgeting perspective.
This property re-assessment does not happen in Cayman, so the advantage is that an owner can hold on to a property for an indefinite amount of time without any tax related costs. This is especially so in the case of land, for example even if vegetation becomes overgrown and encroaches on a road front, the government will maintain the road frontage. So, in the case of land, there is absolutely no ongoing cost associated, tax or otherwise.
The only form of tax directly related to property is actually on the transfer of property from one owner to the new owner. The purchaser is liable for this fee, which is currently set at 7.5 percent of the real estate value of the property and does not include furniture or personal effects.
This fee may seem quite sizeable to pay upfront, but spread over the time of ownership it becomes less and less of an impact associated with the purchase. This percentage fee is not unusual as most countries have a transfer fee that the purchaser is liable for and in some countries the fee is as high as in the Cayman Islands.
On the sale of the property an owner also has no tax obligations from Cayman’s perspective. For foreign nationals owning property in Cayman, there may be a tax obligation to one’s home country, but no cost of this nature is owed to the Cayman government as the purchaser pays the stamp duty.
Upon selling a property, there is also no capital gains tax, as there is in many other countries. So any capital gained through the ownership of the property is all for the owners to have, yet another reason owning property in Cayman is so attractive.
Another interesting advantage is the absence of any death/inheritance tax for the transfer or gift of property through love and affection. For this there is a small, less than US$200 cost to transfer the property through love and affection to a close family member, yet another advantage to owning property in the Cayman Islands.
These tax differences between Cayman and other jurisdictions in relation to real estate investment, piggybacked on a strong Cayman market with historical stability due to multiple factors such as location, low crime rate, stable government, excellent infrastructure, professional services, a strong financial industry and tourism industry, make owning Cayman Islands real estate a wise investment.
In the past few years, Cayman’s real estate market has held its own and increased in value. Even in the economic downturn seen by the rest of the world, while transactions may have slowed, values held for the most part. See figure 1
In 2014, coming off of what has appeared to be a very active high season for real estate in Cayman, based on property listings that are tracked by the Cayman Islands Real Estate and Brokers Association, CIREBA, total market transactions for the first half of 2014 increased by 36 percent compared to the first half of 2013, while sales dollar volume to the end of June showed an even larger increase of 69 percent compared to the same period in 2013.
As at the end of June, the total number of pending sales transactions was also up 20 percent and pending sales volume was up 106 percent higher than last year.
The overall market increase was driven significantly by increased sales of condominiums along Seven Mile Beach and also residential homes. Increases in these two market segments are indicators of confidence in Cayman’s economy from both overseas investors and also the local professional residents. See figure 2
|Sales as recorded by CIREBA – as of June 30, 2014|
|Total Market||302||$ 181,208,092||179||$ 133,348,951||36%||69%|
|Pending||167||$ 165,244,440||139||$ 80,343,965||106%||20%|
|Residential Homes||60||$ 53,712,302||39||$ 44,230,260||21%||54%|
|SMB Condos||60||$ 51,018,000||29||$ 31,307,417||63%||107%|
|Other Condos||91||$ 29,326,426||73||$ 29,086,929||1%||25%|
|Land – beach/res/ag||75||$ 24,751,222||68||$ 17,950,300||38%||10%|