Amendments to stamp duty rates

Introduction

1. The 2013 National Budget Address on 22 November 2012 announced a review of stamp duty rates. These changes (and others not announced) have now been enacted in the Stamp Duty (Amendment) Decree 2012, No 84 of 2012.

2. Some of the changes arising from the amendment were not foreshadowed, are somewhat surprising and may be errors (see in particular paragraph 13 re $100 stamp duty on cheques). The changes particularly affect lending, property, insurance and tenancy transactions.

Significant changes

Refinancing exemption for securities removed

3. Perhaps the most significant change is the apparent removal of the stamp duty exemption for borrowers refinancing their secured indebtedness from one financial institution to another. The refinancing exemption was introduced in 1998. It ensured that, for example, a borrower who had granted a mortgage to a bank (paying 1% stamp duty on the amount secured by the mortgage) did not have to pay that amount again if the borrower moved its indebtedness to another bank.

4. The abolition of this exemption was not foreshadowed in the National Budget Address (indeed, it had been announced that existing exemptions would be retained). This may be a drafting error.

Stamp duty on security documents – increase

5. Stamp duty on mortgages, mortgage debentures and bills of sale or other securities has increased to 1.75% of the amount secured (from 1.01%).

Property transfers (including shares)

6. Stamp duty has increased to 3% of the purchase or consideration price (previously it was 2.02% for property and 1.01% for shares). Transfers of shares listed on the South Pacific Stock Exchange remain generally exempt.

7. Transfers of “property” generally are charged (as they have always been). This means that instruments of transfer of all forms of property are subject to stamp duty. Transfers of goods, livestock, wares or merchandise (legal title to which does not need to be transferred via a written instrument) are generally not subject to stamp duty.

Insurance policies

8. Duty rates for policies of general insurance over real property (ie land and buildings) have increased from 5 cents per $100 of cover to 18 cents per $100 of cover, except for residential properties where the value of the property is $150,000 or less (6 cents per $100 of cover). The Decree is unclear on the stamp duty rates applicable for general insurance on personal property such as motor vehicles.

9. Note the potential for confusion for the concessional cover for “residential property”:

(a) the test is the value of the property, not the amount of cover. This means that for a home valued at, say, $200,000, stamp duty of $360 will apply to any policy of general insurance (even if the cover is limited to $150,000). It is not clear whether, for the purposes of valuation, the value of underlying land would be taken into account

(b) “property” is not just land and buildings. For example, do residential contents (eg furniture and chattels) qualify for the lower rate of stamp duty if their value is less than $150,000?

10. Stamp duty on travel insurance has been introduced for the first time, also at the rate of 18 cents per $100 of cover. This means that stamp duty alone on a typical travel cover (say for F$1,000,000, which would be normal to cover medical, evacuation and public liability risks) would cost $1,800. As one insurance industry source has commented, the stamp duty on travel insurance may cost more than a return air fare (let alone the insurance premium).

11. Stamp duty on marine policies of insurance are increased from 5 cents per $100 of cover to 6 cents per $100 of cover, as well as for time charters for less than six months in duration.

Leases

12. Leases were previously stamped based on the length of the lease, the amount of any premium paid and the maximum ascertainable rent. This has now changed. Different amounts of stamp duty now apply:

(a) for commercial leases stamp duty is $1,000

(b) for tourism and audio-visual leases stamp duty is $1,500

(c) for residential leases not issued by the Housing Authority stamp duty is $500

(d) for agricultural leases stamp duty is $100

(e) for residential leases issued by the Housing Authority the duty is $100.

The result is a significant increase for tenancy agreements of the type Fiji citizens typically enter into, even for $3-400 a month. Stamp duty is payable by the tenant.

Bills of exchange

13. Stamp duty on bills of exchange has increased from 4c to $100. This is presumably an oversight as an ordinary cheque is also a bill of exchange. Note that any cheque signed after 1 January 2013 is currently subject to stamp duty of $100 as the law currently stands. Presumably this will be amended.

Increases in nominal stamp duties

14. Duty on a deed of settlement has increased to $50 (from the previous $10 applying to a deed).

15. A copy or duplicate of any document will now attract duty of $5 instead of $1.

16. A discharge of a mortgage, mortgage debenture or bill of sale will attract stamp duty of $10 instead of $1.

17. Stamp duty on a guarantee will be $100 (previously it was $10).

Conclusion

18. We expect that the error in respect of cheques will be corrected and that refinancing exemption may be restored. However amending legislation will be required to do this. Presumably that amending legislation will apply from 1 January 2013 (the effective date of all of the above amendments). However until that occurs, the law is as above.

19. Please click here to access a copy of the Decree.

Richard Naidu
Partner
Direct Dial +679 322 1816
richard.naidu@munroleyslaw.com.fj

 

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