The Bahamas Stamp Tax & Value Added Tax
There have been a number of legislative changes in 2014/15, one of the most significant being the implementation of Value Added Tax (“VAT”). VAT is a form of indirect consumption tax charges on the supply of goods and services. This article will explore the impact of VAT on real estate transactions in The Bahamas.
VAT was implemented on 1st of January 2015 at a rate of 7.5% and is governed by the Value Added Tax Act, 2015 (the “VAT Act”), Value Added Tax Regulations, 2014 (the “VAT Regulations”.) In June, 2015, the Ministry of Finance, VAT Department implemented VAT Rule #2015-025 (Real Estate) (the “VAT Rule”) in an effort to provide clarity relating to VAT on real estate. In July 2018, the VAT was increased to 12%.
When considering the purchase of a property in The Bahamas, there are various professional services involved that will now incur VAT. These include fees for appraisals, title search fees, legal fees and real estate commissions. There is no VAT on the sale price for real estate transactions, only on the fees of the transaction.
Although not a professional fee incurred during the purchase of a residential property, a buyer needs to bear in mind that homeowner association fees are also subject to VAT.
VAT and Stamp Duty on the transfer Of Real Property
As of July 2018, there is no VAT on the sale or transfer of real property. There is a Bahamian Government Stamp Duty Tax on all sale and transfers of real estate.
For the avoidance of doubt please note the following:-
- Conveyances include the sale, lease, assignment or other transfer of real property from an owner/s to another.
- Real Property includes, but is not limited to:
a) Vacant land
b) dwellings for first time owner-occupiers whether or not valued over $100,000;
c) Commercial buildings
e) tenements or any other structures attached to the land;
f) time-shares; and
g) any buildings constructed for sale by contractors who are also the owners;
Rate of Government Stamp Duty on Real Estate Transactions
Sale Price Stamp Duty Rate
$0 – $99,999 2.5%
The Bahamian Government Stamp Duty tax is normally split equally 50-50 between the seller and the purchaser.
(Information from the Bahamas Real Estate Association)
As a purchaser, you will need a local Bahamian Attorney to represent you in the purchase of your real property. Your attorney will perform many duties in your interest while closing on a real estate transaction. Some of the responsibilities of the attorney include, performing the title search, registering your purchase with the Investment Board, obtaining necessary permits if needed, advising you, and liaising with the seller’s attorney. Standard legal fees are at 2.5% plus VAT of the purchase price plus disbursements. (These legal fees can vary). Mosko Realty Ltd. is happy to recommend a lawyer for you, simply ask your agent today.