Guide for Buying Real Estate in The Bahamas
Value Added Tax (VAT)
When buying a property in the Bahamas, there is a Value Added Tax (VAT) that is applied to the purchase price. The VAT rate varies depending on the value of the property:
- 2.5% for properties valued at $100,000 or less
- 4% for properties valued between $100,001 and $300,000
- 6% for properties valued between $300,001 and $500,000
- 8% for properties valued between $500,001 and $700,000
- 9% for properties valued between $700,001 and $1,000,000
- 10% for properties valued over $1,000,000
First-time home buyers who are Bahamian citizens may qualify for a reduced VAT rate of 4% on properties valued between $300,000 and $500,000.
It’s typical for the VAT to be split evenly between the buyer and seller, but this can be negotiated during the buying process. As your real estate agent, I can help guide you through this process and provide you with more information about the costs associated with buying a property in the Bahamas.
Legal Fees
As relates to legal fees for purchasing property in The Bahamas, each party is responsible for their own attorney. The cost of legal services is typically based on the value of the property being purchased, with different rates applying to properties of different values. However, it is important to note that these rates are not set in stone and are open for negotiation with your attorney.
- Properties valued at $500,000 or less typically have a 2.5% legal fee.
- Properties valued between $500,000 and $1,000,000 typically have a 2.0% legal fee.
- Properties valued between $1,000,000 and $5,000,000 typically have a 1.0% legal fee.
- Properties valued at over $5,000,000 typically have a 0.5% legal fee. It’s always advisable to consult with a local attorney or real estate agent to ensure compliance with the laws and regulations, and to negotiate the legal fees that apply to your property purchase.
Real Estate Commission
When it comes to buying or renting property, the standard practice is for the seller or landlord to cover the cost of real estate commissions. However, this can be negotiated and may vary depending on the specific agreement between the parties involved.
As for commission rates, the typical fee for developed properties is 6%, while undeveloped land carries a commission rate of 10%. Keep in mind that these rates are subject to Value Added Tax (VAT) as outlined in the relevant section.
Real Property Tax
Real Property Tax, or RPT, is a tax that is assessed on all real estate in the Bahamas. The tax is calculated based on the value of the property, and there are different rates for owner-occupied properties, residential properties, commercial properties, and vacant land for non-residents.
For owner-occupied properties, the first $250,000 of the property value is exempt from RPT. The next $250,000 is taxed at a rate of 0.625%, and anything above $500,000 is taxed at a rate of 1%. For first-time homeowners, there may be an RPT exemption for the first five years of ownership for properties valued at $500,000 or less.
For residential properties that are used as dwelling places and have four units or fewer, the first $75,000 is subject to a flat fee of $300. Anything above $75,000 is taxed at a rate of 0.625%. For commercial properties, the first $500,000 is taxed at a rate of 0.75%, and anything above $500,000 is taxed at a rate of 2%.
For vacant land owned by non-residents, the first $7,000 is subject to a flat fee of $100. Anything above $7,000 is taxed at a rate of 1.5%.
Exemptions
There are a few exemptions to Real Property Tax (RPT) in the Bahamas. These include:
- Property owned by Bahamians and located in the Family Islands
- Property approved as commercial farmland by the Ministers of Agriculture, Trade and Industry, and Finance
- Unimproved property owned by Bahamians without any physical additions or alterations that have not increased the market value by more than $5,000
- Property used exclusively for charitable or public service without any profit being derived
- All properties located in Freeport, Grand Bahama.
It’s worth noting that if you fall under any of the above exemptions, you may be eligible for RPT exemption and should verify it with the Department of Inland Revenue.
Property taxes are typically billed in mid-October and are due by December 31st of the following year. The Department of Inland Revenue has the ability to re-assess the value of any property that they believe has increased in value. The maximum amount of property tax that can be assessed per year is $50,000.
It is important for property owners to ensure that their taxes are paid on time, as failure to do so can result in a surcharge of 5% per year. Outstanding property taxes also create a legal charge on the property. If a property is transferred with unpaid taxes, the new owner will become liable for those taxes. It is also important to note that when a transfer of ownership occurs, the Department of Inland Revenue must be notified and an owner-occupied affirmation may be required, depending on the situation.
It is important to note that these are the current real property tax rates, and they may change over time.
Permanent Residency in The Bahamas through Real Estate Investment
Obtaining a Permanent Residency in the Bahamas can be done through a real estate investment. The minimum requirement for this is to purchase property worth at least $750,000. For investments of $1.5 million or more, the process for Permanent Residency will be expedited. Along with the primary applicant, their spouse and dependents can also be included in the application.
As a Permanent Resident, you’ll have access to a number of benefits, including no taxes on capital gains, transfers, personal income, or estates. Additionally, being a resident of the Bahamas grants you the opportunity to live in a tropical paradise while enjoying tax-free living.
Another benefit of obtaining a Permanent Residency through real estate investment is that you’ll be able to repatriate the entire proceeds of any property sale, including profits if you register the purchase with the Exchange Control Department of the Central Bank at the time of purchase. Your real estate lawyer can handle this registration for you.
Owner-Occupied Home Rentals
If you are an owner of a home that you reside in, and you wish to rent out one or more rooms to visitors, you are required to register for a license. To be considered an owner-occupied rental, the owner must reside in the home for six months or more of the year. To obtain a license, you can visit your local Family Island Administrator’s Office or the Hotel Licensing Department of the Bahamas Ministry of Tourism and Aviation in Nassau, Bahamas.
Visas
Citizens of the United States, United Kingdom, and Canada do not need a visa to enter The Bahamas for stays of up to 3 weeks, as long as they have a return ticket. If you are a US citizen, you can stay for up to 8 months without a visa. For those planning to live, work or do business in The Bahamas, an immigration permit is required and can be obtained through the Bahamas Immigration Department.
