CAYMAN ISLANDS Law and Practice Contributed by: Adam Johnson, Appleby
Subject to limited exceptions, ad valorem share trans - fer tax is payable on the transfer or issue of equity capital in a land-holding corporation, at the rate of 7.5% (if less than KYD2 million) or 10% (if KYD2 mil - lion or more) of the proportionate value of the entire land holding. A land-holding corporation includes a partnership, foreign corporation, chartered corpora - tion, mutual fund or incorporated company (but not a corporation sole or charitable corporation) that holds any legal or beneficial interest (excluding interests cre - ated pursuant to bona fide security instruments) in landed property in the Cayman Islands (or interest in another land-holding corporation). Landed property includes freehold interests in Cayman Islands real property and any leasehold interest where the original term exceeded 30 years. Most other instruments and documents are subject to a fixed rate of stamp duty in comparatively nominal amounts. Registrable instruments are also subject to relatively immaterial registration fees. Subject to limited exceptions, real estate used for paid tourist accommodation attracts tax at 13% of the amount charged to each tourist. No other domestic taxes or municipal rates are cur - rently payable on the occupation, acquisition, owner - ship or disposal of Cayman Islands real property or income deriving therefrom. 2.11 Legal Restrictions on Foreign Investors There are generally no restrictions on foreign owner - ship of real estate in the Cayman Islands, although certain formalities may apply to different types of pur - chaser. The carrying on of business from real estate within the Cayman Islands requires certain local licences, some of which are specific to property type. 3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate The most typical forms of security for the financing of real estate are:
• legal charge; • debenture (corporates only); • legal or equitable mortgage/charge over shares in the company that holds the real property; • assignment of any rental income; • assignment of any sale contracts and/or any devel - opment contracts (usually for developments); • assignment of insurance proceeds; and • guarantees from directors, shareholders, related companies or individuals. All legal charges over real property must be registered at the Cayman Islands Land Registry, and debentures creating fixed and floating charges are noted on the title for the real property if they are related to a regis - trable legal charge. Charges over shares in a Cayman Islands company will typically be noted on its register of members, and all security interests granted by a Cayman Islands company should be recorded in its register of mortgages and charges. Assignments by way of security are usually created by deed, and notice must be given to the counterparty in order to perfect the security. Due to the size of the Cayman Islands real estate mar - ket and the stamp duty payable on direct and indirect ownership interests in Cayman Islands real estate and the granting of security, it is generally not common to see large portfolios of real estate held by funds or investment trusts. 3.2 Typical Security Created by Commercial Investors See 3.1 Financing Acquisitions of Commercial Real Estate . 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders There are no restrictions on granting security over real estate to foreign lenders, although a foreign compa - ny holding the benefit of a legal charge over Cayman Islands real estate must register as a foreign company in the Cayman Islands.
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