Stamp duty in the Bahamas is being increased by 2% from the beginning of July in a move that the industry says will put off buyers.
Officials have refused desperate pleas from the real estate industry to grant a two to three month window post July 1 to allow real estate transactions underway to close at the existing Stamp Duty rates.
Zhivargo Laing, minister of state for finance, confirmed that the new rates would take effect along with other budget measures and all real estate transactions that had not closed and had their conveyancing stamped would be subject to the new rates.
The increase applies to all real estate transactions apart from those involving first time buyers. For property between $0-$20,000, the rate goes up from 2 to 4%, for property between $20,000 to $50,000 it rise to 6%, between $50,000 to $100,000 it goes up to 8%, up to 10% for properties between $100,000 to $250,000 and 12% for everything higher in value.
Andrew O’Brien, chairman of the Bahamas Bar Association, said agents had hoped a window would be granted for transactions to close at the old rates amid concerns that buyers would pull out.
O’Brien added that its also going to be a huge burden on banks, purchasers and vendors who are in the middle of transactions and have agreed to pay a rate that is 2% less. He is predicting confusion as transactions that closed on June 30, for example, would not have an opportunity to get to the Treasury for Stamping, and all of a sudden they have another 2% to add on.
He suggested that one way to combat that is for the Treasury to recognise any transaction that has a signed agreement before July 1 or the date of announcement of the Act.
‘There’s a lot of confusion in the legal community and among realtors also. I’ve got several transactions where the potential purchasers will not proceed if they have to pay another 2% in tax. The most sensitive way to deal with this is to have a two month window,’ he said.
There are also concerns that the tax increase will affect overseas buyers who currently view the Bahamas as a good investment opportunity.
Like many countries, the Bahamas is having to introduce belt tightening measures. The Prime Minister and MPs are taking pay cuts, air and sea departure taxes are being increased along with hotel room taxes. Increasing stamp duty is seen as an easy way of increasing revenue quickly.