Attorneys have asked the Bahamas Bar Association (BBA) to get a definitive position from the government on how it is seeking to determine market value in order to assess stamp duty, finding that uncertainty is derailing real estate deals in some cases.
Adrian White, head of the BBA's Real Estate Committee, said that the committee has been asked by quite a number of attorneys to look into the issue.
"It's something practitioners have raised with us as being an area we need to look into," said White.
"Over the last four months [we have] seen what appears to be a change in the policy at the Treasury. Where they previously relied on real property tax valuations of properties, whether they now continue to rely on them remains to be determined, and if they will rely on them again in the future is not known at this time."
White, an attorney with law firm Delaney Partners, said that in addition to the particular question of whether real property tax value assessments will be used to determine stamp duty owed, there has been a longstanding question of what truly constitutes the "market value" of a property being sold in The Bahamas. Some argue it should be the price agreed to by the two parties buying and selling the property, while others believe it should be based on an appraisal.
White noted that there has been a legitimate concern of the government to ensure that safeguards are in place to ensure that the correct amount of tax is being collected on a transaction, and that a price is not being purposely deflated while a "side deal" would ensure the seller in fact receives a higher price for the property than is recorded.
This has seen the government rely on assessments of property values that are available to them via the real property tax system. However, such appraisals, White noted, have often been carried out "at the height of the market" and are no longer reflective of the true price of the property. This can result in stamp duty being inflated unduly. Meanwhile, he added that most practitioners are not inclined to engage in such "side deals".
White said it is key that practitioners get clarity on what the government intends to do in all cases when it comes to assessing the value of properties and the stamp duty owed on them, noting that when a different approach than was expected is applied it can "certainly" cause deals to be disrupted.
"It can put a deal on ice and it can cause a deal not to materialize because there's a lot of consideration and cost factors that go into the terms of a sale, a lot of fees, and if a party can only complete a purchase based on a budget that restricts them to a particular all-in amount and there is an undetermined factor or cost of obtaining an appraisal on top of that all-in amount that could be break the deal," said White.

Click here to read more at The Nassau Guardian