What is Stamp Duty
Originally introduced in the Netherlands in 1624, stamp duty is a tax levied on legal documents. Historically, this included the majority of legal documents such as cheques, receipts, military commissions, marriage licenses and land transactions.
In Bermuda, stamp duty is charged under the Stamp Duties Act 1976 on legal instruments such as property deeds and rental leases where you need government stamps for authentication. Qualifying documents cannot be presented as evidence in any proceeding in a court of law unless they have been properly stamped.
Many jurisdictions have implemented methods of e-stamping, but in Bermuda a physical stamp still has to be attached to the document to denote that stamp duty had been paid. Stamps must be purchased directly from the relevant Government office.
The rate of stamp duty varies depending on the legal instrument.
Residential Sales
If you purchase a property in Bermuda, stamp duty must be paid to convey the property. Stamp duty is charged on all purchases of houses, condominiums, apartments, other buildings and undeveloped land.
Even if you gift a property or swap properties with someone else, with no cash changing hands, you still have to pay stamp duty on the market value of the property. It also doesn't matter if you're buying the property outright or with a mortgage, stamp duty still attaches.
The only occasion where stamp duty does not apply to a property sale transaction is in the case of a first time home owner purchasing a property for $750,000 or less. This initiative was introduced in April 2009 to encourage home ownership.
The amount of stamp duty on a sales transaction is based on a progressive scale depending on the sale price of the property. The rates that are currently in effect are summarized in the table below.
| Stamp Duty Tiers | Rate | Full Amount |
|---|---|---|
| First $100,000 | 2% | $2,000 |
| Next $400,000 | 3% | $12,000 |
| Next $500,000 | 4% | $20,000 |
| Next $500,000 | 6% | $30,000 |
| Over $1.5 million | 7% |
In effect, at the top end, stamp duty amounts to $64,000 plus 7% of everything over $1.5 million. The cost of stamp duty is usually shared equally between buyer and seller, though the division may be negotiated.
When you purchase a property, the stamp duty is payable on the day of completion and is included in the closing costs of the transaction. Your lawyer will usually handle the payment of stamp duty on your behalf.
Residential Leases
In Bermuda, stamp duty is also payable under the Stamp Duties Act 1976 on rental lease contracts. Although there may be a temptation to forego stamping a lease, as with other legal documents, a rental lease cannot be entered into evidence in court unless it has been duly stamped. It is therefore advisable for both Landlord and Tenant to require that the lease be properly stamped.
As with sales transactions, the amount of stamp duty on a rental lease is based on a progressive scale depending on the gross monthly rental amount. The rates that are currently in effect are summarized in the table below.
| Monthly Rental Amount | Stamp Duty |
|---|---|
| Under $1,200 | $75 |
| $1,200 to $1,499 | $100 |
| $1,500 to $2,499 | $150 |
| $2,500 to $3,499 | $200 |
| $3,500 to $4,999 | $300 |
| $5,000 or more | $400 |
Normal practice is for the stamps to be affixed to the “original” copy of the lease held by the Landlord and for a “duplicate” stamp purchased for an additional $25 to be affixed to the Tenant’s copy of the lease.
Who pays the costs of the stamps is a point of discussion between Landlord and Tenant, though it is very common for the costs to be shared equally between the parties.