BAHAMAS Law and Practice Contributed by: Alistair Chisnall and Erica Paine, Graham Thompson
contract scheduling, and for that reason most par - ties entering into construction agreements and pro - jects will rely upon the advice and representation of professionals (such as attorneys, quantity surveyors, project managers and construction consultants) to ensure that their interests are contractually protected through a construction project and process. 7.3 Management of Construction Risk No information has been provided concerning devices used to manage construction risk in The Bahamas. 7.4 Management of Schedule-Related Risk No details have been provided regarding schedule- related risk management within construction projects in The Bahamas. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance It is possible, albeit rare, for owners to require formal guarantees or other additional forms of security as surety for a contractor’s performance on a project. Such matters predominantly arise in the case of pre- construction condominiums, particularly those being developed by a developer/owner that is also the con - struction company or directly affiliated with it. In such projects, letters of credit or performance bonds from a financial institution are generally relied upon, rather than other forms of security. 7.6 Liens or Encumbrances in the Event of Non-Payment Under Bahamian law, contractors and/or designers are not permitted to lien or otherwise encumber a property in the event of non-payment. A contractor seeking to recover payment of a debt due would be required to enforce their contractual rights by com - mencing an action against the owner/customer in the Supreme Court of The Bahamas (or such other juris - diction contractually agreed between the parties to be the appropriate forum for disputes) and obtaining a judgment against that debtor party. 7.7 Requirements Before Use or Inhabitation Before use or inhabitation, a Certificate of Occupancy must be issued under the Building Regulations Act, 1971. The certificate is issued by the building control officer upon being satisfied that a building operation
has been completed in accordance with the building permit issued by the Ministry of Works, and it certifies that the building is fit for occupation and use.
8. Tax 8.1 VAT and Sales Tax
As noted in 2.10 Taxes Applicable to a Transaction , all sales and transfers of land between third parties, whether direct or indirect, attract VAT payable to the Public Treasury under the VAT Act, except for certain, specifically exempted or zero-rated transactions. In a typical sale and purchase transaction, it is cus - tomary for a buyer and seller to agree to share the payment of the applicable tax equally, but this is a business decision for the parties and is not required by law. In the absence of an agreement to the con - trary, the liability under the VAT Act to pay VAT falls jointly and severally on the supplier and the recipient of the real estate (with potential liability extending to acting attorneys and agents/brokers where the VAT is not paid by the parties). There is a statutory obligation for the parties to a transaction to request and obtain a Provisional VAT Invoice before closing a transaction and to ensure that VAT is timely paid on the closing of it. The VAT payable on supplies/sale of real estate (charged at 10%) may not be accounted for as input tax deductions. 8.2 Mitigation of Tax Liability As a matter of general good commercial practice by prudent buyers, and particularly in large purchase transactions, it may be advantageous for a purchase transaction to be structured as a “net” sale rather than a “gross” sale, as this can help to mitigate the amount of tax payable in respect of the transaction. 8.3 Municipal Taxes Municipal taxes are not payable in The Bahamas, but operating businesses are required to hold a business licence and pay annual business licence fees. In July 2023, under the Business License Act 2023 foreign persons who wish to rent their properties are required to register for a Bahamian business licence.
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