THE BAHAMAS Law and Practice Contributed by: Alistair Chisnall and Erica Paine, Graham Thompson
ty was acquired or gifted with proceeds from illegal activities; • under the Environmental Planning and Pro - tection Act, 2019, administrative orders may be issued to halt or prevent environmental damage; • under the Real Property Tax Act, the public treasurer has the power to sell certain land where annual property taxes are in arrears; and • under the Building Regulations Act, 1971, the minister responsible for building regulations has the power to condemn and/or destroy unsafe or derelict structures. 2.10 Taxes Applicable to a Transaction Generally speaking, all sales and transfers of land between third parties, whether direct or indirect, attract VAT payable to the Public Treas - ury under the Value Added Tax Act (VAT Act). VAT on a transaction is calculated on either the consideration paid for the property or the fair market value of the property, whichever is greater. The fair market value may be determined by an appraisal from a professional valuer, or is taken as the assessed value for real property tax purposes, if higher. The rate of VAT payable on the sale and purchase of land depends upon whether the conveyance is made to an Bahami - an or a foreign person. Conveyances to a Baha - mian individual or a permanent resident with the right to work in The Bahamas are calculated on a sliding scale of 2.5% for transactions valued at less than BSD100,000 up to 10% for transac - tions over BSD1 million. In the case of a foreign person, company or other entity, all transactions are charged at 10%. It is customary for a buyer and seller to agree in a typical sale and purchase transaction to share the payment of the applicable tax equally, but
this is a business decision for the parties and not required by law. The transfer of shares of a land-owning com - pany (or its parent) similarly attracts VAT and, under the Value Added Tax (Supply of Real Prop - erty) (General) Rules, 2023, any real property owned by a land-owning company is deemed to be transferred in the same proportion of value as the interest transferred/acquired in the land- owning company. There are certain exempt (or rather, “zero-rated″) transfers of real estate, or transfers that may be eligible for partial exemptions. These include certain voluntary intra-family transfers, corporate intra-group transfers, estate planning transfers, purchases and mortgages by first-time home - owners, and transfers of residential mortgages. In the case of financing transactions (including purchase or construction financing), under the VAT Act a debenture or mortgage that secures a monetary obligation also attracts VAT at a rate of 1% of the monetary obligation secured. 2.11 Legal Restrictions on Foreign Investors While foreign direct investment in targeted sec - tors of the economy is generally encouraged in The Bahamas and successive government administrations have supported and facilitated it, such investment is also regulated, and foreign investors and purchasers must obtain govern - ment approvals that differ in nature and process, depending (in the case of real estate-related investments) on the type of purchaser, the land to be acquired and the intended development or use planned for the land.
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