The Tribune

• Contractor shortage difficulty for Abaco

• 75-day deadline on real estate incentive

• Bahamians fully exempt; foreign discounts

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Real estate buyers will be “challenged” to exploit the government’s VAT waiver/discount on deals under $250,000 due to a shortage of contractors in the Dorian-hit islands, it was argued yesterday.

Ken Hutton, Abaco’s Chamber of Commerce president, and realtors both told Tribune Business that purchasers will face a host of practical and logistical difficulties when it comes to starting actual construction within the time limits prescribed by the government.

The Disaster Reconstruction Authority (Special Economic Recovery Zone) (Relief) Order 2021, which gives effect to the incentive requires that purchasers - whether Bahamian or foreign - must start construction or repairs to a damaged within 75 days of acquisition to be eligible for the tax break.

“Where a property was subject to the tax discount or zero rating under the order, and the purchaser has not started construction or repairs within 75 days of the closing of that sale, that tax becomes payable as if this order was not in force,” it said. Purchasers acquiring a vacant property have to produce plans showing they will “undertake material commercial or residential development of the property”.

Mr Hutton applauded the government’s intent to prevent real estate buyers on Abaco and Grand Bahama from simply pocketing the tax break and then doing nothing to develop their properties, adding that the incentive was “definitely a positive step” for stimulating the islands’ post-Dorian redevelopment.

“It will certainly help incentivise people who were on the fence to make a decision sooner rather than later,” he told this newspaper. “It’s good news. I can’t fault the government for that. Hopefully people will be able to take advantage.”

Informed of the 75-day deadline to begin construction, Mr Hutton added: “I’m sure people would like to do that, but there are challenges with permitting, getting materials so that construction can start. A big challenge here is finding a contractor able to do that. It’s a wonderful thing to have the capacity to take advantage of that, but what if you don’t.

“We’re in a significant housing crisis, and what we need is multi-family homes not single family. I’m hopeful that we’ll have that addressed. We’re not looking for the government to solve Abaco’s problems; we’re looking for the government to work with Abaconians to solve Abaco’s problems.”

Mr Hutton was backed by Mike Lightbourn, Coldwell Banker Lightbourn Realty’s president who, while praising the VAT savings, said of the 75-day timeline: “That’s a problem because you have to get plans drawn and a contractor, and they’re all busy. It’s just outside two months after closing.”

The incentive, which applies to real estate deals valued at $250,000 and below in a bid to incentivise the rebuilding of destroyed or damaged properties, will run from July 1, 2021, to December 1, 2022. It will provide up to a $25,000 tax break for Bahamian purchasers as the ten percent VAT is totally waived on their deals.

Foreign buyers purchasing property in the Dorian hit areas valued up to $100,000 will receive a 50 percent, or maximum $1,250, VAT tax break. Deals valued at between $100,000 and $250,000 will be subject to a 35 percent discount worth up to a maximum $8,750.

Meanwhile, the Ministry of Finance yesterday said it had agreed to alter the  Special Economic Recovery Zone Order to enable residents and businesses who had purchased vehicles prior to May 1, 2021, to import them tax free if they are landed before August 31.

“It’s about time. You don’t know how long we’ve been fighting that fight,” Mr Hutton said, although he added it would have been better if announced earlier. “We had to strike the right balance with providing the necessary assistance and being fiscally responsible with managing the government’s purse,” Senator Kwasi Thompson, minister of state for finance, said in a statement.

“However, we noted and accepted that there have been valid logistical concerns raised by several persons who had delays caused by operational challenges of the shipping agencies. These issues have been raised by individuals and local Members of Parliament in the affected areas.

“The government has heard those concerns and thus we have decided to extend the landing date to August 31, provided eligible persons in Grand Bahama and Abaco can demonstrate that the vehicles were purchased by May 1. 

“If by chance you purchased a vehicle on or before May 1, 2021, which was brought in between June 1 and today’s date and you paid the full duty, and would have otherwise been eligible, you will be entitled to a refund of the sums paid.”