By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Real Estate Association (BREA) has warned the Government it is “unequitable in law” to impose the compliance burden, and related penalties, for property sales VAT on its members.

Carla Sweeting, BREA’s president, in a letter sent to senior tax officials prior to the four-day holiday weekend argued that proposed reforms to the VAT Act are unfair to Bahamian realtors because they do not handle any funds related to real estate sales and nor are they responsible for legally closing transactions.

Pointing out that these duties fall to attorneys, not realtors, she suggested that the Government could employ a much easier method to check whether it is receiving the full VAT due on a Bahamian property transaction. This, Ms Sweeting explained, would involve imposing a legal requirement for attorneys to submit the VAT invoices they receive from realtors to the Department of Inland Revenue.

Realtors typically invoice attorneys for their commission, which is normally 6 percent of the purchase price, once the relevant sale is completed. Ms Sweeting suggested that, by mandating attorneys submit realtor invoices when they pay the due VAT and have the conveyance stamped, the tax authorities will be able to compare the two and determine whether they are collecting the correct amount of tax.

The BREA president, in her June 5, 2025, correspondence to Simon Wilson, the Ministry of Finance’s financial secretary, and Shunda Strachan, the VAT comptroller and Department of Inland Revenue chief, said she was hoping to either meet with or gain a response from them ahead of her Association’s upcoming June 18 annual general meeting (AGM) and the queries likely to be raised by members.

Two key proposed reforms to the VAT Act have aroused realtor fears as they make the profession “jointly and severally liable”, along with attorneys, for covering any unpaid VAT on a real estate transaction from their commission if they have already received it.

And the VAT (Amendment) (No2.) Bill 2025, tabled in the House of Assembly alongside the 2025-2026 Budget, also imposes the requirement that realtors must notify the Department of Inland Revenue of all property-related transactions within 30 days of their closing.

Failure to do so, and/or meet this deadline, will again see them held “jointly and severally liable” along with the vendor for a fine equal to 3 percent of the sales price. The Bill currently stipulates that this mandate only applies to sales of “newly-constructed dwellings”, or land to be used for such purpose, but the Prime Minister last week said this will be amended to include and cover all real estate deals.

The new measures are part of the Government’s crack down on tax evasion and avoidance related to VAT on real estate sales, which Philip Davis KC told the House of Assembly is estimated to be costing the Public Treasury around $100m per year in lost revenue.

Ms Sweeting, though, told the Government’s top tax officials that, in prior years, the liability to pay the transfer tax - whether VAT or the former Stamp Tax - was shared equally by “persons who had equity in the property”, namely the purchaser and seller. Many real estate sales are structured where the buyer and seller agree to share the VAT burden 50/50.

And, pointing out that responsibility to declare a property’s sale, pay the due tax and ensure the conveyance was lodged and recorded in the Registry of Record previously lay with the buyer and their attorney, she asked: “How did the real estate agent become involved and liable?”

The BREA president added: “Since 2001, real estate agents no longer accept funds to complete the transaction or accept a deposit due to the liability of CDD (customer due diligence). All funds in a real estate transaction flow through the attorneys. Real estate agents are only compensated upon the completion of the transaction.

“Theoretically, upon the completion of a sale, the listing agent’s and the sub-agent’s (co-operating agent) contractual relationship ends. So on what residual contractual relationship does the agent have the right or obligation to undertake these new requirements?” The customer due diligence “liability” refers to the enhances financial services regulatory regime imposed after the 2000 ‘blacklisting’.

Meanwhile, posing further questions, Ms Sweeting said it was especially unfair to impose the real estate sales reporting requirement on realtors because, once they have put the deal together, their active involvement in the transaction largely ceases. And, as a result, there is often a time lag before they are made aware a sale has closed, which has implications for meeting the 30-day deadline.

“Under the law of conveyancing in The Bahamas, only attorneys can lawfully convey real property. Real estate agents cannot lawfully convey the title of property. Is the conveyancing act going to be changed or amended?” the BREA president asked. “Real estate agents/companies have very limited knowledge or access to the proceedings and process attorneys do or take. In fact some do not communicate at all.

“Banks are more involved and have knowledge of the entire process. I have also confirmed that, where there is a mortgage, the banks are now issuing two cheques at closing, one for fees (real estate and legal) and one for the transfer, and attorneys have to sign a form that states they are not to pay out until and unless the transfer of property is registered and VAT paid.”

Noting that this could help solve the Government’s VAT avoidance fears, Ms Sweeting warned that the time taken to pay the due VAT and record a conveyance in the registry - which can be as long as three months - threatens to create “a huge problem” for realtors by delaying their commission payments. She suggested that invoices by realtors be used as a cross-check to ensure the correct VAT is paid.

“I have also confirmed that it can take up to three months to get confirmation [of] the payment for VAT and recording at the registry, as both are done on the portals and it is very frustrating. If this is the norm, this is going to be a huge problem for our members when they have done their job and expect to be paid at the closing of the transaction,” Ms Sweeting said.

“Prior to an attorney issuing a cheque to the real estate company for commissions, we are required to send them a VAT invoice. Why can’t the DIR (Department of Inland Revenue) require the attorneys to submit the invoices at the time they pay the transfer tax and record it? This way, you will get what we send to you to verify the amounts are the same.

“The proposed amendments make the real estate agent jointly and severally liable for the VAT and real property tax declaration fine. However, the real estate agent has no legal right to the property like the seller or buyer,” the BREA president added.

“It appears unequitable in law for the proposed amendments to place joint and several liability on any third party that does not perform the conveyance and/or handle the funds or distribution thereof in a real estate transaction.”