Property Reference Guide

Taxation Considerations-

Land Tax - Land Tax, or property Tax is payable annually and is completed as follows: (effective 2008)

There is a ceiling of $60,000 where the dwelling house is used exclusively as a residence by the person who owns the land on which the dwelling house is erected.

Property Transfer Tax - Effective from April 1st 2007 the land tax rate has been reduced from 7.5% to 2.5%. Payable by the vendor on sale of the property.

Stamp Duty - Payable by the vendor at a rate of 1% on the gross consideration.

Personal Tax VS Corporate Tax - The property owner can hold the real estate investment personally or they may set up a holding company to do so. In either case, so long as the owner and/or the holding company are non-residents for Barbados tax purposes, there will be a withholding tax, at a rate of 25%, on the gross rental income earned from the property. However, it is possible to obtain permission from the local tax authorities to file a Barbados tax return which would include gross rental less related expenses. In such a case if the property is owned personally, the applicable tax is 15% on the net rental income. The rate also applies if a company owns and rents the residential property.

Value Added Tax (VAT) - Where the property is rented on a short term basis and income earned exceeds Bds$5,000 monthly or Bds$60,000 annually, the owner will be required to register for VAT and charge VAT accordingly. In Barbados, VAT imposed on the supply of a swelling house that is rented to persons for use as a vacation or holiday home at a rate of 7.5%. The owner may also claim VAT that is charged by suppliers on the maintenance of the property etc. against the VAT charges on the tenants. However, long term rentals are exempt from VAT.

Legal Considerations

The barbados Legal system is derived from English common law and statutes.

The Agreement For Sale - Once negotiations are complete, the starting point of the land sale transaction is the Agreement for Sale, which is usually prepared by the Attorney-at-Law acting for the Vendor. At the time of the signing, the Purchaser signs the agreement in duplicate and pays a deposit - typically 10% of the purchase price. The agreement together with a deposit are then delivered to the Vendors Attorney-at-Law. The Vendor will then execute the agreement and a copy of the duly executed agreement is then delivered to the Purchaser's Attorney-at-Law.

Investigation of Title - After the agreement is signed the Purchasers Attorney-at-Law conducts a search against the title to the property to ensure that the Vendor holds a good legal title to the property and that there are no encumbrances such as mortgages or charges of liens effecting the property. Encumbrances may also take the form of unpaid judgments, outstanding water bills, and unpaid land taxes.

Completion of the Sale and Purchase - The Vendors attorney-at-Law prepares the instrument used to convey the title to the purchaser. Upon closing the Vendors Attorney-at-Law will normally exchange that instrument, along with prior Title Deeds, for the balance of the purchase money.

Closing Costs - The Vendor of the property will be liable to pay the stamp duty and property transfer tax. Legal fees are usually 1.5% to 2% of the purchase price of the property plus 15% VAT.

Retaining Legal Advice - Any person intending to purchase property or sell property must retain the services of an attorney-at-Law on the island to represent his interests. The agreement for sale, The Deed of Conveyance and the Deed of Transfer must all be prepared by an Attorney-at-Law. The peculiarities of Barbados' conveyancing laws, the absence of any scheme of title insurance, and the predominance of unregistered title to land are factors that render real estate transactions in Barbados potentially risky for the unfamiliar purchaser.

Other Considerations

There is no Capital Gain Tax in Barbados, nor are there any estate, inheritance or gift taxes. The Title may be taken in the persons name or a Company may be set up to own the property. In the case of ownership by a company, if it is incorporated outside of barbados, it must be registered in Barbados.

Property Management Fees - This cost can vary depending on the needs of your client. The property management companies on the Island are excellent and the services are customised to suit every property owners needs.

Deposits - Contract deposits are usually 10% of the purchase price. A refundable reservation deposits required if the buyer is purchasing at the pre-construction phase. Ant--money laundering legislation requires non-nationals to provide evidence of the source of funds.

Bank Accounts - A non-national can open a bank account with the proper identification and bank and professional references. Anti-money laundering legislation require non-nationals to provide evidence of the source of funds.

Agency Fees - The unofficial commission for real estate agents is 5% of the sale plus VAT.

Residence and Exchange Controls - Non-residents are required to obtain permission by the Exchange control authority in order to invest in property. They must also register their investment in barbados in foreign currency. THis is to facilitate the future repatriation of funds. Failure to do so could prevent or delay such repatriation. In the statement made by the Prime Minister and Minister of Finance on March 14th 2007, it was proposed where there was a sale of a property by a non resident to another non resident and there is no foreign exchange loss, the proceeds of the sale can be repatriated without restriction.

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