Stamp Duty concerns affecting sales of property in the Bahamas

The property market in the Bahamas has been thrown into confusion by the country’s government increasingly relying on property tax valuations rather than agreed purchase prices to determine the level of Stamp Duty payable.

That’s the opinion of a leading property lawyer in the country who believes that the policy could ‘really wreak havoc’ on the country’s property market.

Stamp Duty uncertainty damaging sales of property in the Bahamas

Under the Stamp Act, the amount of stamp duty payable on real estate transactions is determined by the market value of a property.  This is generally agreed between the buyer and the seller when a property is sold.  However, the Treasury has been increasingly using a ‘real property tax valuation’ of a property to determine market value, irrespective of the price agreed between the buyer and the seller.

Andrew O’Brien, partner in the Glinton, Sweeting & O’Brien law firm and head of the Bar Association’s real estate section believes that this practice has thrown the property market in the Bahamas into a state of uncertainty.

He said: “What has happened is that the Public Treasury is looking to the Real Property Tax Department for the valuation of property purchases.

“Let’s say there’s a transaction for $100,000. Let’s say the Real Property Tax Department has the same property valued at $200,000. The Treasury will say they want you to pay Stamp Duty on the $200,000, rather than the $100,000, which is what you’d bought the property.”

In this example, a buyer would pay $20,000 Stamp Duty at a 10 per cent rate rather than $8,000 duty at an 8 per cent rate.

Mr O’Brien believes that such an increase could be a ‘deal breaker’ for many real estate transactions. He told Tribune Business: “The problem is that parties don’t know what their transaction costs are going to be, so when they enter into an agreement for sale, they can’t be sure what the Stamp Duty is based on.  Historically, it’s been on the purchase price shown on the conveyancing documents, which has always been assumed to be the market value.

 “It’s really creating a lot of confusion, extra work. Some transactions are not occurring because people do not want to enter into something where they do not know what the costs are.”