Wednesday, August 8, 2018
BY NATARIO McKENZIE
Tribune Business Reporter
THE government intends to revert to the previous definition of owner-occupied properties that was in effect up until June of this year, Finance Minister Peter Turnquest said yesterday.
This comes after concerns from affluent Lyford Cay residents were published in The Tribune last week, saying the government’s increased property taxes would drive wealthy second homeowners out of the country and deter new ones.
In a statement, Mr Turnquest noted the government had 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.
He said the government had also taken steps to improve the tax yield from homes used for commercial purposes by recasting the definition of “owner-occupied” properties and by imposing value added tax 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,” Mr Turnquest stated.
He noted 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,” Mr Turnquest stated.
“The government continues to encourage the development of the second home market, being fully cognisant 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,” he added.
The formal announcement on the matter comes after serious concerns were expressed within the local real estate sector and calls were made for the government to clarify the real property tax hikes stemming from the changed “owner-occupied property” definition.
The term “owner-occupied property” had been altered to remove the phrase “or seasonal basis,” instead inserting a requirement that an owner must reside in their property for at least six months annually to qualify under this definition.
The Bahamas’ second homeowner community, many of whom are in this nation for just a few months per year, ultimately fell out of the “owner-occupied” category and lower tax rates that were reduced in 2016.
And, besides the higher tax rate, which the government had doubled from 1 percent to 2 percent on the property value above $500,000, they were also set to lose the $50,000 “cap” that set the ceiling, or limit, on how much they pay annually to the Public Treasury.
Those concerns were outlined in a letter by the Lyford Cay Property Owners Association, which warned Mr Turnquest that the “insensitive and irrational changes” to the Real Property Tax Act’s “owner-occupied” definition were starting to undermine confidence among the very high-end North American investors this nation wants to attract.
In a July 30 letter, the association’s chairman Henry Cabot Lodge III said tax rates that were “too high and unpredictable” would lead to consequences impacting “every sector of the economy that services Lyford Cay”, as existing homeowners sought to exit and new buyers were deterred.