Reduction in stamp tax to stimulate housing market in the Bahamas

Rental Cottage at North Palmetto Point in the Bahamas. PHOTO/File

With the government of Bahamas recent approval of a 2 percent reduction in the country’s stamp tax, there has never been a better time to invest said Rachel Pinder, principle broker at Island Living Real Estate.

The stamp tax, which was originally set at 12 percent in 2010, was reduced to 10 percent for all properties worth more than US$250,000.

According to Pinder, when the stamp tax was first introduced at 12 percent, it was coupled with an increase in annual property taxes and there was a significant decease in buyers, both foreign and local.

While the government of the Bahamas intention was to generate instant revenue, the plan did not work, instead, we buyers withdrew from contracts during the largest slump in the real estate industry.

The reduction in stamp tax will stimulate the market and bring investors back to the Bahamas.

For first time homebuyers who are citizens of the Bahamas, permanent residents of the Bahamas or anyone holding a work permit of the Bahamas, there is an exemption to the stamp tax that they may apply for. To qualify, the buyer must be purchasing a property worth less than US$500,000 that they will use exclusively as the primary residence for a minimum of nine months each year. Income producing properties do not qualify for such exemptions.

The exemption for residents is a great option, as it eases the burden of having to pay an extra 2 percent on closing fees. In addition to the tax decrease, the Bahamas also offers automatic approval of all purchases by foreign investors through the Bahamas’ International Persons Landholding Act of 1993.