The Government yesterday indicated it was unlikely to grant a two-three month window post July 1 to allow real estate transactions in play prior to the Budget announcement to close at the existing Stamp Duty rates, something realtors and attorneys had "desperately" been hoping for.
Zhivargo Laing, minister of state for finance, yesterday said that if the Budget - and its tax increases - took effect on July 1, all Bahamas real estate transactions that had not closed and had their conveyancings 'Stamped' would be "subject to the new rates".
"The law takes effect on July 1," Mr Laing said, adding that the same process implemented for previous changes in the rate of Stamp Duty applied to real estate transactions would be used this time.
He confirmed, though, that the Government had already issued a Protection of Revenue Order, and said: "On the issue of raising taxes there's seldom pleasure. We've got to save the country as best we can."
The Stamp Duty changes unveiled in the Budget involve a two percentage point increase in Stamp Duty across the board for all Bahamas real estate deals, apart from those involving first-time buyers. Thus for deals priced between $0-$20,000, the rate goes from 2 per cent to 4 per cent; for between $20,000 to $50,000, it goes to 6 per cent; for between $50,000 to $100,000, it goes to 8 per cent; for between $100,000 to $250,000, it goes to 10 per cent; and from $250,000 and up, it goes to 12 per cent.
Andrew O'Brien, chairman of the Bahamas Bar Association's real estate section, told Tribune Business that attorneys and realtors were "desperately" seeking clarification on whether transactions currently in play - in the 90-day closing period - would have the new Stamp Duty rates applied to them if conveyancings were brought forward for Stamping after July 1.
They were also "desperately" hoping that a two-three months window could be granted for these transactions to close at the old rates, fearing that the Duty increase - worth several thousand dollars and five-figure sums in some cases - could act as 'deal breakers'.
"A big concern is that the Act will treat the new duty rates for any document presented on July 1 or after," Mr O'Brien, an attorney and partner at Glinton, Sweeting and O'Brien said.
"That's going to create a huge burden on banks, purchasers and vendors who are in the middle of transactions right now, and have agreed to pay a rate that is 2 per cent less."
Transactions that closed on June 30, for example, would not have an opportunity to get to the Treasury for Stamping, and "all of a sudden they have another 2 per cent to pay.
"A way to combat that is for the Treasury to recognise any transaction that has a signed agreement before July 1 or the date of announcement of the Act," Mr O'Brien said.
However, the Protection of Revenue Order signed by the Governor-General effectively means that the Stamp Duty rate changes will take effect from the date of the Budget, May 26.
Of this development, Mr O'Brien said: "I hope not, but there's a lot of confusion in the legal community and among realtors also. I've got several transactions where the potential purchasers will not proceed if they have to pay another 2 per cent in tax.
"The most sensitive way to deal with this is to have a two-month window, have the Public Treasury recognise any deal completed and look at the date of the document. If they recognise the old rate for two to three months, that gives people time to clean up whatever is in process now. It gives people time to plan and prepare."
Long-term, many attorneys and realtors are waiting to see how the real estate Stamp Duty increases play out/.
One lawyer said yesterday that the Government appeared not to have taken a "nuanced" approach to the issue, expressing concern that the tax increases could impact most the Bahamian middle and lower income brackets, given that they would face increases worth several thousand dollars.