The Ministry of Finance on Tuesday released an official statement in response to the controversial threats from Lyford Cay residents, who said they would sell their properties and leave The Bahamas if the new changes to the real property tax are executed.
In an unprecedented move, the ministry has reverted to the original tax limits as a means of “encouraging property development” and issued this statement:
The Ministry of Finance is aware that clarity in the market is being sought with respect to Property Taxes as it relates in particular to the impact on the second home market. The government accordingly wishes to advise the public of the following:
In the recent budget exercise, the Government sought to increase taxes on foreign-owned undeveloped land in The Bahamas, in an effort to discourage land speculation and to encourage development of any such property. It also took steps to improve the tax yield from homes used for commercial purposes by recasting the definition of “owner-occupied” properties and by imposing VAT on vacation home rentals.
After consultation with a range of stakeholders from a number of islands and across a number of industries which depend upon the second home market for their viability, the government has determined that it intends to revert to the previous definition of owner-occupied properties that was in effect up until June of this year. The government will give effect to this by amendment to the legislation once Parliament resumes following the summer break.
Note that both the increased tax on undeveloped property and the imposition of VAT on vacation home rentals will remain.
By virtue of this, the same category of persons who qualified for the “owner-occupied” property designation prior to the recent changes will continue to be qualified as same. They will be eligible for the $50,000 cap on real property tax payments – the cap on such payments that was reinstated by the previous administration in 2013.
The government continues to encourage the development of the second home market, being fully cognizant of its contribution to a number of Bahamian communities, especially in the Family Islands. The government also expects those persons who use their properties to generate commercial rental income to be subject to VAT and contribute to the public purse as do commercial operators in other segments of the hospitality industry.