Closing Costs & Property Taxes
CLOSING COST FOR BUYING OR SELLING PROPERTY IN THE BAHAMAS
It is customary in the Bahamas for the sales price to be quoted as a gross price.
GROSS PRICES: A price given to a broker by an owner shall be deemed to be gross and the broker shall charge the regular commission on such price.
Seller Costs: In a gross sale the seller is responsible for the payment of 50% of the government VAT on the conveyance, the agent’s professional fee, and the seller’s legal fees.
Buyer Costs: The buyer is responsible for the payment of 50% of the government VAT on the conveyance and the buyer’s legal fees.
REAL ESTATE AGENT’S COMMISSION PAID BY THE SELLER:
- Developed Property (single houses, condos): 6% of the purchase price
- Undeveloped property ( vacant land): 10% of the purchase price
- Commercial property or building: 6% of the purchase price
LEGAL FEES:
Buyers and Sellers are responsible for their own legal fees. The attorney fees vary, although it is typically a percentage of the value of the real estate. The Bahamas Bar Association suggested scale fee for acting for one side in a transaction is 2.5% plus VAT.
PROPERTY TAXES
GOVERNMENT TAXES ON PROPERTY CONVEYANCES
The usual practice in the Bahamas is for the tax to be shared equally between buyer and seller unless otherwise agreed upon.
- 10% Government Stamp Duty on all property transactions valued at $100,000 or more.
- 2.5% Government Stamp Duty applicable on all property transactions valued at $100,000 or less.
BAHAMAS GOVERNMENT VALUE ADDED TAX (VAT)
As of July 1, 2018 the Bahamas Government has imposed a 12% Value Added Tax (VAT) on all products and services in The Bahamas including real estate services, appraisals, legal work, title search, commissions and insurance.
ANNUAL REAL PROPERTY TAX RATES
The rates of tax on real property are as follows:
In respect of owner-occupied property:
- The first $250,000 of market value is tax exempt
- More than $250,000 and not exceeding $500,000 of market value is 0.625%
- More than $500,000 and not exceeding $5,000,000 of market value is 1%
- More than $5,000,000 of market value is ½% (capped at $50,000 annually)
In respect of unimproved property: (other than unimproved property exempt by virtue of Section 39 of the Real Property Tax Act)
- First $7,000 of market value is $100
- More than $7,000 of market value 2%
In respect of any other property:
- First $500,000 of market value is 1%
- More than $500,000 of market value is 2%
Market value is defined as the amount the property would realize, if sold in the open market, without any encumbrances or restrictions. If the return is not filed, the owner is guilty of an offense, and upon conviction thereof, may be fined. Persons knowingly making false statements may be liable to fines, imprisonment, or both fines and imprisonment. If the tax is not paid on or before the last day the tax becomes due, a surcharge will be added.
EXEMPTIONS
- Property owned by Bahamians and situated in the Family Islands is exempt from property tax.
- Property approved as commercial farm land (by the Minister of Agriculture and Marine Resources, and the Minister Finance) may be eligible for property tax exemptions.
- Unimproved property owned by Bahamians, meaning property without physical additions or alterations, or any works benefitting the land which have not increased the market value thereof by $5,000 or more;
- Places of religious worship; school buildings and their gardens and playing areas;
- Property owned by foreign governments;
- Property owned by foreign nations used for consular offices or residences of consular officials and employees;
- Property used exclusively for charitable or public service from which no profit is derived.
FREQUENTLY ASKED VAT QUESTIONS:
(Courtesy of Bahamas Real Estate Association)
http://www.bahamasrealestateassociation.com/page.php?page=21
What if a pending sale does not close prior to January 1st 2015, will this transaction be subject to VAT?
Yes this transaction will be subject to VAT.
Are there provisions for us if we register to re-coup the VAT paid on things such as goods and services that we pay for in our business such as gas, auto repairs, paper, ink, desk fees etc.?
If you are a VAT Registrant, then yes in regards to the VAT paid on certain expenses in your business. These will be deemed VAT Input Credits and are to be deducted out of the VAT that you bill your clients/customers.
I am about to take an exclusive listing for six months which will spill over into the new year, how will this affect our commission charges?
The VAT Act is law and therefore supersedes any written contract between two parties. To be safe, the realtor should include a provision for VAT in the listing agreement as being a tax on its commission in addition to the commission due and payable.
If I rent my apartment is this considered commercial property with VAT payable on sales price?
Under the VAT Act, any income property is deemed a “commercial property”. However, if the rental period is in excess of 45 days then no VAT is to be charged on the rent as the intended use is a rental of a “dwelling”.
There is no VAT on the Commercial sales price as of the new amendment issued by the Ministry of Finance which was issued on Nov 16, 2014. However, VAT will still be applied to the legal fees and real estate fees.
Also see Section 10 of the VAT Regulations.
If I rent my vacation home by the week when I am not using it, is this considered commercial property with VAT payable on sales price?
Under the VAT Act, any income property is deemed a “commercial property”. However, if the rental period is in excess of 45 days then no VAT is to be charged on the rent as the intended use is a rental of a “dwelling”.
There is no VAT on the Commercial sales price as of the new amendment issued by the Ministry of Finance which was issued on Nov 16, 2014. However, VAT will still be applied to the legal fees and real estate fees.
Also see Section 10 of the VAT Regulations.
If I rent a home I own and use it as an investment property, is this considered commercial property with VAT payable on sales price?
Under the VAT Act, any income property is deemed a “commercial property”. However, if the rental period is in excess of 45 days then no VAT is to be charged on the rent as the intended use is a rental of a “dwelling”.
There is no VAT on the Commercial sales price as of the new amendment issued by the Ministry of Finance which was issued on Nov 16, 2014. However, VAT will still be applied to the legal fees and real estate fees.
Also see Section 10 of the VAT Regulations.
If a company owns multiple units and wants to sell them as individual units is this considered a commercial or residential sale?
The sale of each property is looked at based on its “use” or “intended use” to determine VAT liability. If the units are sold as a residential unit, then VAT is paid on the professional fees only.
Will VAT have to be paid on commercial sales in addition to Stamp Tax ?
No Vat on Commercial Sales – However Vat will be on the real estate fees and legal fees.
My commission is paid by the attorney will the VAT be paid by the attorney as well? Will I have to file that in my records?
The real estate company will have to provide a VAT invoice to get paid the VAT at the completion of the sale. And yes you will have to keep a record.
If the agent pays his own NIB and they make over 100k, do they have to pay Vat on their commissions earned?
If the “agent” is an employee of the real estate company then there is no further VAT liability when the agent is paid.
Is VAT only paid on residential rentals under 45 days?
Realtors need to change their terminology on VAT paid versus VAT billed. On the actual rental (i.e. Lease Agreement) residential rentals under 45 days are VAT liable whereas rentals over 45 days are not. If a leasing fee is due to a real estate company for securing the rental and provided the real estate company is a VAT Registrant then there is VAT charged on the leasing fee
.
The Broker collects the commission from the sale then pays VAT. Does the agent then have to pay VAT?
The real estate company will have to provide a VAT invoice to get paid its commission and the VAT at the completion of the sale. If the “agent” is an employee of the real estate company then there is no further VAT liability when the agent is paid.
My understanding is the broker would pay the net amount of VAT. The VAT from commission less the VAT from the agent. Then in turn the agent would have to pay the VAT from his/her commission if they are over $ 100,000.00 in earnings.
Realtors are not to pay VAT out of their commission because as a VAT Registrant they are obligated by law to charge VAT on their services, receive payment and pay it over to the VAT Office.
Is the total VAT from the commission paid by the broker for his part of the commission then the agent (for his part of the commission)?
The real estate company will have to provide a VAT invoice to get paid its commission and the VAT at the completion of the sale.
Who invoices the ‘Buyer’ the agent upon closing or the Attorneys?
The real estate company will have to provide a VAT invoice to get paid its commission and the VAT at the completion of the sale. Whoever pays the commission, is responsible for the Vat.
Is there VAT on vacant land sales?
There is no VAT on any type of vacant land but there is VAT on the professional services rendered in the sale of vacant land.
What is the situation with the stamp Tax/duty?
Stamp duty/tax remains the same after VAT is implemented until further notice.
My company rents homes on a weekly basis, we currently add and pay 10% government room tax, will we have to pay this along with the 7.5% VAT?
No, the room tax will be eliminated when VAT starts.
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Visit Bahamas Real Estate Association for further Info:
http://www.bahamasrealestateassociation.com/page.php?page=19