What is Stamp Duty?
“STAMP DUTY may be an expense you’ll never hear of until you do a legal transaction which requires the assistance of a lawyer.
It’s a government tax you must pay when doing certain legal transactions, the most common being those involving the registration of deeds.
Such deeds include Deeds of Conveyances (when properties are sold from one party to another); Deeds of Gift (when property is transferred without payment, as a gift); Deeds of Mortgage (properties purchased through financing from a financial institution); and Deed Polls (the legal document used to change your name) to name a few.
While Stamp Duty is levied on other transactions besides deeds, such as bonds and the transfer of shares in a company, today’s article will be confined to deeds.)
When is Stamp Duty paid?
Before your deed is accepted for registration at the Land Registry, your deed must receive a stamp (ink, not the postal kind) from the Stamp Duty Section of the Board of Inland Revenue (BIR) showing that the applicable Stamp Duty was paid. Normally, your attorney handles this, but it’s an expense, you, the client bears.
How much do I have to pay as Stamp Duty?
For many transactions done by way of deed, the Stamp Duty is a fixed sum of $25 such as the deed poll mentioned above.
But for many other transactions involving the transfer of property, the amount of Stamp Duty you pay is tied to the value of the property in question. For the purpose of this article, I will use two common examples: a Deed of Conveyance and a Deed of Gift to demonstrate how the Stamp Duty tax is applied. For both types of deeds, the value of the property must be assessed to determine the amount of Stamp Duty to be paid.
Note – If you are doing a Deed of Conveyance, the amount you paid for the property does not necessarily imply the purchase price is the value. You may have bought the property at an over-value or under-value. The normal course of action is to hire the services of a property appraisal expert to obtain a valuation report to present to the BIR.
An important caveat: if you purchased at an overvalue as evidenced by the valuation report, BIR will charge you Stamp Duty based on the higher amount, which is the purchase price. Eg. – If you paid $1 million for land, but the valuation report puts the value at $800,000, you will pay Stamp Duty on the higher figure of $1 million. (Another good reason to always have a recent valuation report from a qualified expert (no more than six months old) before agreeing a figure to buy land).
Now, there is an option to avoid the cost for a valuation report (which is usually also tied to the value of the property). You can ask BIR to carry out their own valuation of the property themselves. The downside is that BIR is often inefficient at this and may take many months. You will need to speak to your attorney for the pros and cons on whether this option would meet your needs.
You can however find some detailed information on the Stamp Duty rates from this government website: http://www.ird.gov.tt/news/stamp-duty-rates
If you just came back to my article after clicking the link, you may be pretty confused. Yes, it does require some explanation, which your lawyer can assist with. An actual online government stamp duty calculator was available to the public here: http://www.ird.gov.tt/etax, but for several months now, this calculator has been “temporarily unavailable”. You can probably keep checking to see if the calculator is accessible once more.
Some other useful points you will want to note on how Stamp Duty is calculated:
- You need to know how your property is classified for use by the Town & Country Planning Division (TCPD): Is it for residential use, commercial use, agricultural use or industrial use? If you don’t know, its advisable to get this information from TCPD.
2. Currently, only properties designated for residential use by TCPD qualifies for exemptions from paying Stamp Duty. Buying agricultural land (which is usually cheaper) and building your home on it does automatically convert the designated land use to “residential”. You will have to apply to TCPD for a change of use of the land.
- Properties comprising land only will be completely exempt from Stamp Duty if the value does not exceed $450,000. – If you paid $300,000 for land designated by TCPD for residential use, you pay $0 for Stamp Duty.
- Properties comprising land and building designated for residential use by TCPD qualifies for an exemption from paying Stamp Duty, up to the figure of $850,000.
- If you don’t pay Stamp Duty within two months of signing the deed, BIR has special formulas to charge you penalties until payment.
The above, while not fully comprehensive, should have given you some good insight into that tax called Stamp Duty. If you still have questions though, do not hesitate to get an answer from the attorney handling your transaction.
Copyright © 2020 Neela Ramsundar, LL.B (HONS), L.E.CCivil Litigation Attorney at Law & Certified Mediator.
Disclaimer: The contents of this article are for general informative purposes only. It does not provide legal advice and does not create an attorney-client relationship with any reader. For legal advice on your specific situation, please contact an Attorney-at-Law of your choosing directly. Liability for any loss or damage of any kind whatsoever allegedly incurred a consequence of using content in this article is thus hereby excluded to the fullest extent permitted by law.