The new fiscal year for the Government of The Bahamas began on 1stJuly 2018. Legislative amendments that came into force at the beginning of this fiscal year have resulted in changes to the taxing regime applicable to real property in The Bahamas.
REAL PROPERTY TAX
When the Deputy Prime Minister and Minister of Finance delivered the 2018/2019 Budget Communication in the House of Assembly on 30thMay 2018, he indicated that the Government intended to develop a modern and equitable system of property taxation.
The definition of the term “owner-occupied property” has been amended to remove the phrase “or seasonal basis” and to insert a requirement that an owner must reside in their property for at least six months annually. The new definition of the term is now: “property occupied by a person who being the owner in fee simple or a mortgagor in possession occupies and resides in such property exclusively as a dwelling house on a permanent basis that is six months or longer”.
As a result of this change, beginning 1stJanuary 2019, an owner that resides in their property for less than six months in any given year will be required to pay real property taxes annually at the rate of 0.75% on that part of the market value which does not exceed $500,000.00 and 2% on that part of the market value which exceeds $500,000.00.
This change will affect Bahamian citizens, permanent residents and second home owners who do not reside in their property for a minimum of 6 months. Accordingly, the statutory maximum annual tax of $50,000.00 which applies to owner-occupied property, will not apply in such instances.
Increased rate of Real Property Tax for Vacant land owned by Non-Bahamians
The annual real property tax payable in respect of unimproved land owned by non-Bahamians on that part of the market value which exceeds $7,000.00 has been increased from 1.5% to 2%.
Transfer of property to the Treasurer to satisfy outstanding real property taxes and surcharges
A new section has been inserted into the Real Property Tax Act that will allow persons who have outstanding real property taxes and surcharges to make application to transfer their real property to the Treasurer to satisfy unpaid sums. The application must state: (i) the applicant’s inability to pay the unpaid sums; (ii) any reasonable steps taken by the applicant to satisfy the unpaid sums; (iii) the name of all legal and equitable owners of the property; and (iv) whether there are any liens or other charges on the property.
Exemption for First Time Home Owners
The exemption from stamp duty for first time home owners has now been extended to 30thJune 2023. However, all applications for the exemption must be made within twelve months of the date of the conveyance to the applicant. The Affidavit sworn by the applicant which accompanies the application must now state that there is not and never has been any other dwelling house held by the applicant or on his behalf situated in or outside of The Bahamas.
Applications for first time home owner stamp duty exemption on conveyances executed on or after 1stJanuary 2003, must be submitted on or before 31stDecember 2018.
Transfers of Mortgages on Dwelling Houses
The Stamp Act has been amended to reflect that a “transfer of a mortgage” in respect of a dwelling house includes a transaction where a mortgage is satisfied by one licensed lending institution and a new mortgage is created with a new licensed lending institution in relation to the same property. No stamp duty will be payable on the satisfaction of the subsisting mortgage or the new mortgage except where further sums are advanced by the new lending institution, in which case, stamp duty will only be payable on the further sums advanced by the new lending institution.
New Rates of Stamp Duty
The following changes have been made to the applicable rates of stamp duty:
- Assignments or transfers of personalty or realty, deeds of conveyances of realty, and assignments, transfers, leases, subleases or licences of a marina slip are all now subject to stamp duty at 2.5% of the value of the personalty, realty or marina slip where the consideration is less than $100,000.00 and 10% of the value where the consideration exceeds $100,000.
- Deeds of rectification, confirmatory conveyances, affidavits of loss, declarations of trust, deeds of variation and any other document in respect of which (a) stamp duty was previously paid on the initial conveyance or other instrument and (b) there is no change in the parties thereto or otherwise, save for a clerical or other error such as to the description of the property, are now subject to stamp duty at $10.00.
- Affidavits, Renunciations or Releases of Dower and Powers of Attorney and any instruments which are not specifically provided for in the First Schedule to the Stamp Act are now subject to stamp duty at $10.00.
Value Added Tax
The Value Added Tax Act has been amended to make all transfers of real property exempt from value added tax, with the exception of commercial leases which remain subject to value added tax.
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The information contained in this bulletin is provided for the general interest of our readers, but is not intended to constitute legal advice. Clients and the general public are encouraged to seek specific advice on matters of concern. This bulletin can in no way serve as a substitute in such cases.
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