(Above: Stunning New Listing Schooner Bay, Abaco. click photo for details.)
I have been holding off on writing this post on the current updates to Bahamas Real Property Tax changes. Why? The bills which were passed with the Budget debate seemed to extreme. I thought (and it turns out, quite rightly) there were going to be changes. On June 6th right after the Deputy Prime Minister had made his budget communication to the country, I had written a post on the subject.
At the time there was much discussion and surprise among the real estate world. “Surely this had been a mistake.” “Surely the governing party had not thought this through”. The implications were quite dire and the bills as tabled, were voted on and passed in the House of Parliament. The implications potentially doubled, tripled or in a few rare cases would have been a factor of 10 on the amount of annual Real Property Tax owing. In any event the latest word is that the Owner Occupied definition will remain the same.
An owner of a home in the Bahamas will qualify for the “Owner Occupied” Property Tax bracket, as long as it is residential, not multi-family and is the primary residence in the Bahamas. The exact definition has been and will remain “residing in the home on a permanent or seasonal basis”.
A home with a $1,000,000 property tax value will attract an annual tax bill of $6,562 when billed at the Owner Occupied Rate. The same home, if billed at the “Other” rate would see an annual bill of $13,750.
The “Other” category includes everything which is not undeveloped and does not qualify for the Owner Occupied status.
Similarly a $500,000 home would have a tax bill of $1,562 as “Owner Occupied” or $3,750 annually if considered “Other”.
The biggest recent changes are to undeveloped land or raw vacant lots. The rate on raw land has increased to a flat rate of 2% across the board. This increase will certainly add some motivation to folks who have been waiting for the ‘right time’ to sell a piece of land. It bears mentioning that in order to be categorized as developed it is necessary to substantially complete a home. you can’t just throw up a shack and dig a few holes and think your property would fall into the developed category.
This increase on the tax rate for undeveloped land is going to stick, so be prepared for an increase in your tax bill for 2019. The changes go into effect Jan 2019 so the billing coming out next month is not supposed to be affected.
The ‘cap’ will also be reinstated at $50,000 for Owner Occupied properties. In my view the prudent approach would be to adjust the cap to $60,000 instead of eliminating it all together. Small changes are in order when it comes to taxation. Throwing huge new gears into the economy usually have negative and large consequences.
The long and short of it, is that there were big changes to the Real Property Tax Act proposed and intended to be put forth HOWEVER they are going to be recalled an the status quo will be maintained with the exception of the increase in the rate for raw land.
More details can be found at the following webpage.
Now the topic of Value Added Tax on Vacation rental income is another topic which I hope to address soon. Stay tuned.