The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government may have disqualified 40-50 per cent of the first-time home buyer market from obtaining Stamp Duty exemptions on their purchases, a leading attorney warned yesterday.

Adrian White, head of the Bahamas Bar Association’s real estate committee, told Tribune Business that the recently-introduced Stamp (Amendment) Bill 2013 appeared to exclude vacant land purchasers from a tax break worth thousands of dollars.

Persons looking to acquire vacant land, and then construct a home on it, accounted for around half the first-time buyer market, he warned, adding that the legislative amendments had failed to make the Stamp Duty exemption process “crystal clear”.

Calling for the Government, via the Ministry of Finance, to produce a policy document that would clear up all remaining uncertainties, Mr White said the new requirement that proof of Bahamian citizenship be produced could be subject to legal challenge using the International Persons Landholding Act (IPLA).

And he added that, based on his interpretation of the new amendment, first-time buyers whose combined mortgage and conveyancing values exceeded $500,000 would also be denied the Stamp Duty exemption.

“With regard to my interpretation of it, which is likely to be an interpretation shared by a number of my fellow practitioners at the Bar, I would say that the amendment does not go so far as to bring clarity to existing exemption issues affecting applicants and practitioners advising first-time buyers,” Mr White told Tribune Business.

“There’s likely going to continue to be some uncertainty until a policy paper is produced and distributed.”

Such a paper would set out whether the Government, through the Ministry of Finance and the Treasury, would grant first-time buyers the Stamp Duty exemption - which can be worth up to $50,000 - in particular situations or cases.

Turning to the latest amendment, Mr White told this newspaper: “My belief and understanding is that applicants having to obtain a mortgage to finance a home, if their conveyance and mortgage, when added together, are more than $500,000, their application is going to be denied.

“That provision does not go far enough to make it crystal clear. I believe the intention of the amendment was to state that you will not receive the exemption if the mortgage and purchase amounts exceed $500,000. It’s not as clear as it could have been.

“And people who buy vacant land will no longer be able to apply for the exemption. The Bill, as drafted, prevents persons who buy vacant land from receiving the exemption.

“The result there is not going to be good for persons wanting to buy vacant land and then build a home. They’re not going to qualify for the exemption.”

The Government’s own ‘objects and reasons’ attached to the Stamp (Amendment) Bill 2013 state that one of the changes is designed for “the removal of an application for exemption of Stamp Duty for the purpose of the purchase of vacant land for the construction of a dwelling house”.

Asked about the implications of this, Mr White replied: “Unfortunately, there’s going to be a number of persons that had hoped to buy vacant land and build their own home who are not going to be happy with this Bill.

“My understanding is that roughly 40-50 per cent of the applications being received by the Treasury were persons applying to receive the exemption for vacant land.”

The potential ramifications of this are that persons relying on the Stamp Duty exemption may no longer be able to go through with home/land purchases, or have to find more money to cover tax obligations, resulting in a transaction slowdown.

The end result of this is a further slowing of the real estate market, at a time when it is already sluggish and depressed by $540 million worth of mortgage loan arrears. And, with a housing market slowdown, there is less income for realtors and attorneys.

“It doesn’t clarify is as neatly as we had hoped,” Mr White told Tribune Business of the Stamp (Amendment) Bill 2013, when it came to the first-time buyer exemption,.

“It has to be addressed in a policy paper dealing with all provisions, spelling out clearly who is entitled and who is not entitled.”

Mr White effectively urged first-time buyers of vacant land to get their Stamp Duty exemption applications into the Treasury this week, before the current exemption expired, along with those whose combined conveyance and mortgage values exceeded $500,000.

Elsewhere, Mr White said the Government had inserted into law, via the new amendment, what had previously been policy when it came to first-time buyer duplexes and condominiums.

When it came to duplexes, if the applicant only lived in one half, they would receive only 50 per cent of the Stamp Duty exemption.

“The one thing that is certain, the only positive note for the industry, is the exemption will continue after June 30, and first-time buyers will see savings on their purchase so long as they meet the requirements under the Act,” Mr White added.

He suggested that the only potential benefit from disqualifying vacant land and ‘$500,000-plus combined’ applicants was to reduce the administrative burden on the Treasury’s Exemption Unit, producing a “quicker turnaround time”.

Mr White also told Tribune Business that the amendment’s requirement for proof of Bahamian citizenship to receive the Stamp Duty exemption was “going to create a bit of a buzz” among attorneys.

He suggested some might challenge its legality due to section 10 of the International Persons Landholding Act, which contains a non-discrimination clause requiring non-Bahamians to be taxed at the same Stamp Duty rates as Bahamians.

“Some people will question the interpretation of that provision, that you have to produce Bahamian citizenship, whether that is valid based on the International Persons Landholding Act,” Mr White explained.