August 20, 2014 marked The Bahamas’ journey into the land of Value Added Tax. The VAT bill was passed in the House of Assembly by a vote of 22 to 8. The bill itself sparked many conversations around the country concerning the practicality of the bill, especially in the real estate industry. In a recent Tribune article , Bahamas Real Estate Association’s (BREA) president, Carla Sweeting, mentioned that, “Value-Added Tax (VAT) on commercial property transactions is the biggest hurdle”, stressing that the industry will have to face complications as a result of tax reform.
Sweeting mentioned in an interview with Tribune Business that there were many more expected questions than answers on tax reform. “The commercial side of our industry is the one that has most of us concerned in that there is VAT attached to the sale price as well as the fees and, on the rental side of the commercial, it’s also included in the Common Area Maintenance (CAM),” She continued. “That is our biggest hurdle we are going to have to climb – the commercial side, both rental and sales. The residential side is pretty straightforward.”
On the technical side of things, residential sales and rentals will have VAT attached only on the professional fees, like commissions, legal fees , appraisal fees and insurance. The complication comes in with commercial sales where VAT will be applied to the sales price as well.
Also, another major question to realtors is who would have to register to pay VAT. The question of individual agents and the companies they work for registering for VAT. How VAT will be collected, from who, and how everyone will be reimbursed are top concerns for realtors.
According to Sweeting,there are a lot more questions than answers, but that is to be expected given that this is new to the entire country. January 1, 2015 is the big day that VAT is set to be implemented into business across the country. Mario Carey Realty (MCR) is doing its job to prepare and embrace the new tax regime that is about to be injected into our daily lives. Everyone is encouraged to educate themselves on the issues and concerns of VAT and prepare for a new paradigm.