August 09, 2018
The 700-member strong Bahamas Real Estate Association (BREA) today lauded government’s decision to reconsider a proposed real property tax hike, calling the reversal a move that would stave off a negative impact on the second home market and would reaffirm faith in The Bahamas as a stable investment option.
“BREA welcomes Government’s decision to revert to the pre-Budget definition of owner-occupied residential property, eliminating the onerous requirement that owners spend six months of the year in residence,” said BREA President Christine Wallace-Whitfield.
In its 2018/2019 Budget, the Minnis Administration amended the definition of owner-occupied property in the Real Property Tax Act imposing a requirement for those owning a second or third home in The Bahamas to be resident for a minimum of six months to qualify for ‘owner-occupied status,’ entitling them to a $50,000 cap on real property taxes.
With only a small percentage of second homeowners spending that period of time in the country, the outcry from those whose tax bill could have been doubled, tripled or more was instant. The reclassification from owner-occupied to “other property” came with a significantly higher tax rate and no cap.
A tax rate of three quarter of one per cent on the first $500,000 with a two per cent rate applied to the value above this threshold was set to be imposed on ‘other property.’
Ex-pat homeowners, many who had maintained homes in The Bahamas for decades, expressed astonishment at the sudden change. In the case of property valued at $10 million -- as many homes in Ocean Club Estates, Lyford Cay, Old Fort Bay and private islands throughout The Bahamas are -- real property tax would have gone from $50,000 to nearly $200,000 annually. Backlash was immediate.
Realtors took to the airwaves and the newspapers decrying the move as shortsighted, citing the numerous spin-off benefits derived from the second-home market.
BREA President Christine Wallace-Whitfield
“The luxury market is very important to the overall economy of The Bahamas. Whether a family is in residence or not, the ownership of that property generates constant income in terms of jobs, maintenance contracts, all sorts of related expenses,” said Wallace Whitfield.
High net worth individuals have many choices, she noted, including other parts of the Caribbean and Florida where property tax is quite reasonable and foreigners are welcomed with an E-5 Visa that entitles them to residency “without intolerable demands.”
“We understand that Government did not fully appreciate the backlash that the decision to tie six-month residency to a cap on real estate would have but in light of the fear of a mass sell-out and departure, they had the courage to reverse their decision,” said Wallace Whitfield.
“That is never easy for any official to do, elected or otherwise, and so we wanted to express deep appreciation for their willingness to listen to BREA and others. That one move may have just saved hundreds of millions of dollars in real estate value and helped to preserve trust in The Bahamas.”
Deputy Prime Minister and Minister of Finance Peter Turnquest has said government will revert to the previous definition of owner-occupied properties, amending the legislation, once Parliament resumes following the summer break.
BREA reiterated its call for a joint meeting to engage the real estate sector and relevant government officials with a view towards finding the most suitable approach to preserve the country’s competitive edge and investment community credibility.