Picture yourself in the Bahamas—white sandy beaches, crystal-clear turquoise waters, and a thriving real estate market. It's no wonder international buyers are flocking here for incredible investment opportunities. And guess what? The Bahamas is known as a tax haven, offering savvy foreign investors a chance to optimise their tax situation.
Peter Dupuch, Owner Broker, notes that “The Bahamas has experienced huge growth in foreign investment since the Covid lockdowns ended. People realised that remote work is possible and where better to do it than The Bahamas! Easily accessible from the United States, Canada and Europe, with a warm and sunny climate there is nowhere better to make your second home!”
People with high net worth are buying vacation or retirement homes to own their very own slice of paradise. With a stable economy and favourable government policies, it's a shift that makes perfect sense.
In this blog, we'll go over real estate taxation in the Bahamas and explore strategies to help investors maximise their profits. So, let’s see how real estate investors can make the most of their real estate ventures in this tropical haven.
Disclaimer: The information provided in this blog is for informational purposes only; we are not certified to give tax advice. Please consult a qualified tax professional for personalised recommendations.
Take Advantage of the Bahamas' Tax-Neutral Status
Investing in the Bahamas comes with tax benefits. The Bahamas doesn't have an income tax for residents or non-residents. This means you don't have to pay income tax in the Bahamas.
The Bahamas also doesn't have capital gains tax or inheritance tax. This means buyers can invest in real estate in the Bahamas without worrying about additional taxes on their profits or passing on their property to loved ones.
For these reasons, the Bahamas offers a favourable tax environment, allowing foreign buyers to make the most of their real estate investments. Here's how the Bahamas' tax-neutral status translates into more profits for investors:
No Income Tax: This means more profit for real estate owners! Rental income from properties in the Bahamas is currently tax-free, whether it belongs to an individual or a business. They can enjoy the full returns on their investments and maximise their rental income without tax burdens.
No Capital Gains Tax: Investors get to keep more of their investment profits when they sell their property in the absence of capital gains tax. This helps preserve their wealth and can potentially boost their overall returns. This way, they can make the most of their real estate investments in a tax-free environment.
No Inheritance Tax: This ensures that the beneficiaries of foreign investors can inherit the properties without being burdened by tax obligations. “An additional benefit to purchasing in The Bahamas, is that property is not subject to inheritance tax, so upon passing the assets/profits remain with the beneficiaries tax free," said Peter.
Understanding the intricacies of the tax-neutral status and structuring investments appropriately can help foreign buyers fully capitalise on the tax advantages offered by the Bahamas.
Consider Using a Bahamian Trust Structure
A Bahamian trust structure is a legal arrangement that helps foreign real estate investors protect their assets, plan their estates, maintain privacy, optimise taxes, and flexibly manage their properties. It offers a secure and profitable way to manage real estate investments in a friendly and efficient manner.
According to Peter, "The Bahamian Trust Structure provides a secure and tax-efficient framework for foreign buyers to protect and grow their real estate investments in this tropical paradise."
Bahamian trust structures can be an excellent option for foreign real estate investors. They can protect properties from legal claims or creditors, providing strong asset protection.
These trusts are also handy for estate planning as they can ensure a smooth transfer of the real estate to chosen beneficiaries while possibly reducing estate taxes and avoiding complicated legal processes. Plus, Bahamian trusts offer privacy, letting owners keep their real estate investments confidential.
On the tax front, they can help optimise tax obligations, potentially lowering taxes in the investor’s home country. The best part? The owners have complete flexibility and control over managing and distributing their real estate assets how they like!
Maximise Benefits From Property Tax Exemptions
Foreign investors should keep a few things in mind regarding property taxes in the Bahamas. Here's what they need to know:
Owner-Occupied Properties: If the owner lives in the Bahamas and their property is worth less than $300,000, they don't have to pay any property taxes. That's a great benefit for homeowners! For the next $200,000, the tax rate is 0.625% and then 1% on the value that exceeds $500,000 to a maximum real property tax of $120k per annum.
Non-Owner-Occupied Properties: The tax rate depends on the property value and number of units for houses not occupied by the owner. If the property has 4 units or less and is used as a residence, there’s a flat fee of $300 for properties valued at less than $75,000. Anything above will incur a tax of 0.625%.
If a residence has more than 4 units or the property is used for commercial purposes, tax is charged 0.75% for the first $500,000, then 1% for the next $1,500,000 and 1.5% on the balance.
Some Restrictions Apply to Foreign Buyers: Foreign investors can buy real estate in the Bahamas without many restrictions. They have the same rights as Bahamian citizens, except for properties over two acres or second homes, which would require a permit.
Here are a few ways foreign investors can maximise their benefits:
Full Payment Benefit: If tax is paid by March 31 of any tax year, a 10% discount is applied.
Senior Citizens Benefit: After the $300,000 exemption, senior citizens can get a 50% discount on their balance if their home value does not exceed one million dollars. (65 or older, have a NIB Senior Citizen's card).
Strategic Property Selection: Non-owner-occupied properties valued below $500,000 will benefit from the lower tax rate of 0.75%. Owner-occupied properties below $300,000 will enjoy no property taxes!
Seek Professional Guidance: Investors should engage with local experts, such as BREA-licensed real estate agents and tax advisors, to ensure compliance with property tax laws and explore potential exemptions or deductions.
By understanding and leveraging these property tax laws, foreign investors can make informed decisions, minimise tax liabilities, and maximise the benefits of their real estate investments in the Bahamas.
Remember to Factor-In the Government VAT
The Bahamas government imposes a value-added tax (VAT) on Property Conveyances. It is a tax that investors must pay when buying or selling real estate in the Bahamas. The buyer and seller can conventionally split the Government VAT.
As of July 1, 2022, the following rates came into effect:
| Sale Value | VAT |
| Less than $100,000 | 2.5% |
| $100,000 up to $300,000 | 4% |
| $300,000 up to $500,000 | 6% |
| $500,000 up to $700,000 | 8% |
| $700,000 up to $1 million | 9% |
| Over $1 million | 10% |
- Those buying a home for the first time may get a VAT exemption for the value below $300k.
- Homeowners may also qualify for a VAT refund on constructing or renovating their first home.
As of July, 2023, non-Bahamian buyers will pay 10% VAT on purchases over $100,000, the sliding scale being eliminated, and 2.5% on purchases below $100,000.
Ready to make your real estate dreams a reality in the Bahamas? With its tax advantages, stunning locations, and promising investment opportunities, it's the perfect time to dive into this tropical paradise.
ERA Dupuch Real Estate Agency is here to help you navigate the process and maximise your investments. From tax advantages to prime locations, we've got you covered. Contact us today to turn your Bahamian real estate dreams into a reality!
Disclaimer: The information provided in this blog is for informational purposes only; we are not certified to give tax advice. Please consult a qualified tax professional for personalised recommendations.
Posted by Helen Dupuch on
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