An increased charge based on how much home or business owners pay each year to insure their buildings is being proposed as part of Cayman Islands government changes to stamp duty laws.
The Stamp Duty (Amendment) Bill, 2012, if approved by lawmakers, will standardise the rate of stamp duty paid for the transfer [sale] of property to 7.5 per cent for everyone, no matter where they buy the land or building structures in the Cayman Islands.
There are some exceptions carved out for first-time Caymanian home buyers whose homes are valued at $400,000 or less, or who buy land valued at $150,000 or less.
However, the bill as proposed would also serve to increase the flat fee of $12 now paid on property insurance premiums. That charge, according to the bill, will now be “2 per cent of the cost of new or renewed property insurance premiums”.
Cayman Islands Insurance Association president Derry Graham said it was his understanding that the charge, which his organisation only learned about Monday, would apply to the total value of the building section of the policy.
For instance, if someone was paying $7,500 for an annual property insurance premium on their home but the “building section” of the policy only cost $5,000; the homeowner would pay the 2 per cent charge on the $5,000 portion of the premium.
That works out to an extra charge of some $100 per year, as opposed to the $12 flat fee that exists now. If the building section of the policy cost $10,000, the additional annual payment would be $200.
Mr. Graham said organisation members intended to meet shortly to discuss potential ramifications of the bill and admitted he still needed some clarification on some of the provisions.
“We were never consulted about it,” Mr. Graham said. “It is a substantial increase to from a $12 flat fee to a 2 per cent charge on premiums.”
Association members contacted by the Caymanian Compass said they were trying to determine what effect the increased premium fee might have on insurance customers.
Mr. Graham said he was concerned that it could lead property owners back down the road of under-insuring their structures if they know they’ll have to pay additional government fees, as well as increased premiums, each time they insure for greater property value.
“I’m sure there [are] going to be people out there who think like that,” he said.
The amended legislation sets the dutiable charge to transferable property at 7.5 per cent.
Under the proposal, there would be no different duty amounts charged based on whether the home is located along Seven Mile Beach or whether the property is sold to a Caymanian or a non-Caymanian.
There are some exceptions to that rule.
According to the bill, there would be no duty charged for a property transfer [sale] in the case of a Caymanian buyer purchasing a primary dwelling home valued at $300,000 or less, or land valued at $100,000 or less.
A duty rate of 2 per cent would be charged to that Caymanian home buyer if the home was worth more than 300,000 but less than 400,000; similarly that rate would apply to land valued at between $100,000 and $150,000.