By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government was yesterday urged to modify the “crippling” and “onerous” requirement for companies and IBCs to declare all their Bahamas-based real estate holdings by February 15.

Attorneys, whose law firms act as registered offices and agents for firms incorporated under the Companies Act as well as International Business Companies (IBCs), told Tribune Business that the newly-introduced ‘real property declaration’ represents an “incredibly burdensome obligation” that has left both themselves and their clients struggling to comply by the looming deadline.

Pointing out that this latest compliance-related deadline, following so swiftly behind Business Licence returns and January’s VAT filings, is also occurring at a time when businesses are dealing with the likes of economic substance and tax information exchange filing, they all voiced fears that having to fill-out a 16-page property declaration for every company is simply taking bureaucracy and ‘red tape’ to new heights.

Andrew O’Brien, the Glinton, Sweeting & O’Brien attorney and partner, told this newspaper that while the private sector backed the Government’s drive to crack down on VAT evasion involving high-value real estate sales it feels there better ways to achieve this objective without further undermining the country’s ease of doing business.

He disclosed that both the Bahamas Financial Services Board (BFSB) and Bahamas Bar Association are working to devise alternatives to the ‘real property declaration’, one of which could involve setting a threshold or floor - say $2m - for the value of transactions that need to be reported to the Department of Inland Revenue. Only real estate deals above this limit would have to be reported.

Adrian White, the Opposition MP for St Anne’s and an attorney by profession, described the 16-page ‘real property declaration’ form, which a registered office has to fill out for every corporate client on its books, as akin to “the bruise of doing business in The Bahamas”.

The form, which has been seen by this newspaper, requires registered agents to declare that all the information supplied by their corporate clients is “true and correct” even though they will not necessarily be able to verify its total accuracy. Details on all beneficial owners/shareholders; property addresses and their tax assessment numbers; and taxpayer identification numbers are just some of the details sought.

Also sought by the Department of Inland Revenue is information on whether a particular property is jointly owned with another company or person; if it is being held in trust for someone; and if a corporate entity or person is holding it in trust for the reporting company. These specifics must be provided for, and repeated, for all properties owned by the reporting company, as well as all sales and purchases it has participated in.

Mr White, warning that The Bahamas “cannot continue to take business for granted”, said the increase in paperwork, time and costs for both registered agents and their clients in completing the ‘real property declaration’ has to be set against this nation’s competitiveness with Caribbean and global rivals. He warned against “squeezing business until the last drop is taken because it looks like we can get more”.

And John Delaney, former attorney general and now principal at the Delaney Partners law firm, told Tribune Business that the ‘real property declaration’ imposes responsibilities upon registered offices and agents that go far beyond those set out in the Companies Act.

He added that while the compliance burden is now being placed on registered agents, they do not hold the information being sought by the Department of Inland Revenue and are instead wholly reliant on their corporate clients to provide this in time to meet the February 15 deadline.

Tribune Business reported last June, just after the 2024-2025 Budget was unveiled, how the Government was amending the VAT Act to mandate that registered agents and offices must submit annual declarations on all their corporate clients’ real estate deals and holdings as part of a crackdown on VAT evasion.

It appears that few in the private sector took much notice at the time, but they are definitely alive to it now. Mr Delaney said full guidance on what is required was only made available to the private sector, via the likes of the BFSB, last month and it would have been impossible to provide details on all client real estate holdings, plus any 2024 transactions, before then.

Dexter Fernander, the Department of Inland Revenue’s operations manager, could not be reached for comment before press time last night. However, concerns were mounting that the ‘real property declaration’ is unnecessarily adding to the already-strained cost and ease of doing business in The Bahamas.

“We understand the Government’s concern to close VAT loopholes, and the private sector is willing to assist, but the method that has been presented is onerous and needs to be rescinded,” Mr O’Brien told Tribune Business.

“The BFSB and the Bar Association are putting their heads together to present some alternatives not just complain but, in the meantime, the task that has been given us is unreasonable and I strongly doubt many registered offices and agents are going to have the ability to comply. Furthermore, I don’t think the Department of Inland Revenue is going to be able to process all the information.

“Could you imagine getting this from your registered agent at the beginning of the year and told: ‘You have to get this back to me in two weeks’?” Mr O’Brien argued that much of the information sought by the ‘real property declaration’ should already be in the possession of government agencies such as the Bahamas Investment Authority (BIA), beneficial ownership registry and companies registry.

“We’re fielding a lot of questions,” he added. “Our clients aren’t sure what they’re supposed to do, and this is an enormous human effort that can be addressed in a more reasonable and meaningful way.” Mr O’Brien said alternatives, apart from setting a floor or threshold such that only high-value transactions have to be reported, include modifying the amount of information required.

He added that a more “long-term solution” is for the information to be provided when each individual transaction occurs, which would ease the burden on all parties involved, while another alternative is for registered agents to submit information via a list rather than “a declaration for each company”.

“I close off with a hypothetical,” Mr O’Brien said of the challenge in complying by the February 15 deadline. “I wonder what the Government will do if there is 90 percent non-compliance. Are they going to shut down the corporate industry? Are they going to fine everybody; put us all in jail?

“We understand the Government’s objective, and are willing to support the effort to plug loopholes for VAT, but what’s been proposed is crippling with the likelihood that the Department of Inland Revenue does not have the manpower to absorb the information even if it receives it.”

Mr White, meanwhile, described the ‘real property declaration’ as “another hit on top of everything else we have to deal with. It’s a bit exhausting; it’s overly exhausting”. He said around one-quarter of his law firm’s tike is devoted to dealing with compliance issues on an annual basis, and added that companies likely have to assign “almost one-quarter of their workforce to managing regulatory hurdles and red tape” to stay in business.

“We cannot continue to take business for granted,” the St Anne’s MP told this newspaper. “The country cannot continue to take business for granted. We cannot squeeze business until the last drop is taken because it looks like we can get more. We cannot keep on squeezing a business because it looks like there’s more that we can get from it.”

Suggesting that “there’s not much that’s private any more in Bahamian business”, because of the level of disclosure required to both regulators and the tax authorities, Mr White said of the ‘real property declaration’: “The actual form you have to fill out for each entity is 16 pages in length. How is that the ease of doing business? That’s the bruise of doing business in The Bahamas.

“You have to guide your clients through it all, all of the threats of filing deadlines hanging over you, and not every client has the resources to do it themselves. You have to work with the client, advise them, approve it and sign-off on it.

“I’ve said it in the House of Assembly before: The largest commercial building on Carmichael Road, our second commercial city in New Providence, used to be occupied by RBC. I was summoned there by a client, and found it’s no longer occupied by RBC and FINCO, but it’s a special collection unit of the Department of Inland Revenue. That slaps you in the face and says the biggest business in The Bahamas is now tax collection.”

Mr Delaney, meanwhile, said of the ‘real property declaration’: “It’s an incredibly burdensome obligation to be put on registered offices in circumstances where they are really not required to know the underlying transaction aspect of their client’s affairs.

“It’s an onerous duty that has been placed on registered offices and, in many instances, it will likely be a challenge for them to be able to obtain all the information” and meet the February 15 deadline. The ex-attorney general said the concern is not the Government’s drive to crack down on real estate-related tax evasion but, rather, “where certain burdens are placed” because registered offices do not hold the details requested.

“Nothing in the Companies Act requires that of registered agents,” Mr Delaney said of the new duties. “The application of VAT inquiries and collection of information is a drastic expansion of the scope of registered offices. There’s nothing about the registered office business that contemplates changing for that. There’s nothing about the resources they have engaged to deliver corporate office functions that contemplates doing that.

“If it were felt that was the way then they ought to give sufficient notice. This came out without communication. It [the real property declaration] came out in the January, the first week of January, via the BFSB to inform registered offices and tell them what they have got to do.”

The primary functions of registered offices are to keep and maintain their corporate clients’ records; ensure they remain in good standing and pay all related fees/submit all necessary filings; and act as the location where legal proceedings can be served on their clients.

The ‘real property declaration’ reforms are designed to tighten the regulatory net and prevent the evasion/avoidance of VAT due on high-end real estate sales worth over $1m - a revenue stream that the Prime Minister said has under-performed during last Mays 2024-2025 Budget.

The move, which is legally required via the new section 47B in the VAT Act, mandates that all corporate entities must notify their registered agent within 15 days of a real estate transaction closing regardless of whether they are buyer or seller.

Then the registered agent, or the Registrar General if a company has no such agent, must “submit a declaration” to the VAT comptroller by December 31 every year on all their corporate clients’ real estate dealings over the previous 12 months. That date, for this first time, has been shifted to February 15.

“The declaration shall include whether or not the company holds or has sold, transferred, assigned or otherwise disposed of an interest in any real property over the last 12 months,” the Act stipulates. The declaration must also include “the nature of the company’s interest in, and other particulars as prescribed by the comptroller of all real property” bought and sold that year.

And, finally, the “declaration” must also supply “particulars as prescribed by the comptroller of all changes in the legal or beneficial interest of any of the shares” in domestic companies or IBCs over the prior 12 months. This appears designed to prevent persons evading VAT on real estate sales by transferring the subject property’s ownership to a company, then selling the latter’s shares to the purchaser.