The Tribune

By NEIL HARTNELL

TRIBUNE Business Editor

nhartnell@tribunemedia.net

THE GOVERNMENT and tax authorities must “clean up their own house” before punishing others over delayed VAT payments, a senior banker asserted yesterday, warning that the imminent 5.25 percent interest charge will hinder the pace of real estate sales.

Gowon Bowe, Fidelity Bank (Bahamas) chief executive, reacting to the planned imposition of this penalty if VAT due on property deals is not paid within 21 days of the conveyance being executed, told Tribune Business that the Department of Inland Revenue and other agencies need to first examine their own “internal inefficiencies” before “casting blame” on the private sector.

Noting the absence of a land registry, lack of digitisation and delays caused by the tax authorities holding on to conveyances if they believe VAT is being under-paid, he added that all professions and institutions involved in real estate sales - attorneys, realtors and banks - want to swiftly complete the deal but are “frustrated with the ease of transaction”.

Acknowledging that the Government needs to be paid all taxes due as speedily as possible, Mr Bowe told this newspaper that the new interest charge - set to be introduced from October 5 - represents a “broad brush” regulatory approach that appears to treat all practitioners as guilty when, in reality, is just a few who are responsible for late VAT payments.

He added that buyers, as a result, may decide not to initiate real estate deals unless they have complete certainty that the transaction will be completed within the 21-day timeline required to avoid the interest charge - a timeframe Mr Bowe described as “a mythical experience” or “Easter bunny situation” given how fast government agencies typically move.

Tribune Business revealed on Monday how the new charge was passed into law by Parliament in June 2025 but never enforced until now. Attorneys are warning that the 21-day deadline for payment of due VAT on real estate sales, with the clock running from the moment the conveyance is executed, is “impractical” and will push all mortgage borrowers and international buyers into incurring the Prime plus 1 percent (5.25) interest levy.

Once a conveyance is executed, it is packaged with all other necessary documents, including title opinions and searches, and sent to a bank or other lender if mortgage financing is involved. Bahamian banks typically take two to three weeks, or even longer if they have questions, to review and investigate the transaction before they will release the purchase funds, thus automatically pushing the transaction beyond the 21-day deadline.

“I think this is one where the saying: ‘Less haste, more speed’ applies,” Mr Bowe told Tribune Business. “I think there’s a great appreciation for the viewpoint at the Department of Inland Revenue as it relates to the timeliness of settlement of taxes because it has a knock-on impact on their cash flow and the central government’s in terms of the Public Treasury.

“But, at the same point in time, this is one of looking at your own inefficiencies. It’s easy to cast blame and point the finger at the private sector - the legal fraternity, the real estate community and financial institutions - for late payments to be penalised instead of looking internally at some of the bureaucracy and systems in place. You have to first look at the log in your own eye before pointing at the speck in others.

“They are seeking to impose punitive charges for recalcitrance. Their viewpoint is that every practitioner is responsible and I don’t think that’s the case. We have some actors that are spoiling the bunch but, by and large, persons are frustrated with the ease of transactions.”

David Morley, the Bahamas Real Estate Association’s (BREA) president, told Tribune Business yesterday he believes it will be “a real challenge if not impossible” to pay VAT on real estate sales within the 21-day deadline where the buyer requires mortgage financing. As a result, he argued it would be “unfair” to impose the 5.25 percent interest charge on the purchaser because, in effect, they are being penalised for how the system works.

The BREA chief said that while cash purchases may be able to close within 21 days, mortgage deals likely will not because of the time banks require to review and make sure everything is in order so that their loan security is perfected. He added that the feasibility of meeting this has to be “determined by the Bar Council working with the Clearing Banks Association”.

“If the buyer is getting financing, the bank still has to have reasonable time to review the documents,” Mr Morley said, “process it, and release the funds to the buyer’s attorney to complete the sale. That timeframe, whether it’s 30 days, 45 days or 60 days, is really a discussion the Department of Inland Revenue needs to have with the lawyers and banks combined.

“I don’t think it’s fair to fine a buyer that penalty if they have not paid in 21 days because the 21 days is an impractical or unreasonable time to get it done… If there’s financing involved, it may be a real challenge if not impossible to get the VAT paid. The conveyance has to be signed and sent to the bank for them to start processing money. They won’t release the money on an unsigned conveyance.

“There are obviously some issues that need to be resolved.” Mr Morley, noting that the Department of Inland Revenue has held-off enforcing this interest charge for almost 16 months, given that it was introduced into the VAT Act in July 2025, called for implementation to be delayed by at least another 30 days to allow for greater consultation with the private sector and make it “a win-win situation” for all parties.

“The buyer should not be penalised because of an unrealistic timeframe for completing that was established by statute without conversation with people who can legally do the conveyance in the first place,” the BREA president said, referring to attorneys. He added that the latter will also have to confirm whether is is possible to close and pay VAT on cash deals within 31 days.

Acknowledging that the Government wants to receive all due taxes as swiftly as possible, Mr Morley said buyers will have no objection to this as “99.9 percent” want to “complete the transaction right away and get into the property”.

Department of Inland Revenue officials, on a conference call with attorneys last week to warn of the 5.25 percent interest charge’s impending implementation, said the tax authority would deduct the time a transaction spends with it for review or challenge from the 21-day period’s calculation. Mr Bowe, conceding that this provides “some comfort”, nevertheless warned there could also be disputes over which party is responsible for any delay.

While agreeing that those who willing break laws and regulations should be punished, the Fidelity Bank (Bahamas) chief voiced concern over the Government’s “broad brush” approach to this and asserted: “You get more with honey than vinegar”.

Mr Bowe said one of his bank’s “prospective customers” had recently completed a real estate purchase in the US in 15 days “because there was a land registry, they were able to file paperwork in terms of the conveyance. It was able to be registered, probably through an automatic process that gave a land registration number”.

Contrasting this with the system in this nation, he added: “Then you come to The Bahamas where they are trying to impose penalties.” Mr Bowe said the banking industry had managed to slash the time for processing and completing real estate transactions to six months, which he acknowledged was “not the best”, but represented a marked improvement from 12-15 months.

Now, he added, the timeline is moving back towards that period. As for the 21-day interest charge, Mr Bowe told this newspaper: “If we want to have more land transactions and building activity, do we want to increase the cost of doing it or decrease the cost of doing it…

“It has the consequence of derailing future transactions and, more particularly, the speed of transactions. Persons will not initiate transactions unless they know they will get through in the 21-day process. I don’t know your expectations, but getting anything from the tax authorities and central government in 21 days is like an Easter Bunny situation. It’s like a mythical experience. It doesn’t happen.

“You are going to discourage the speed of transactions and initiation of transactions. I go back to saying less haste, more speed, and clean up your own house before you highlight the dirty laundry of others. There’s a lot the Government and tax authorities can do to improve efficiency, particularly in land matters, before they start imposing penalties.”

Department of Inland Revenue officials, in response to concerns raised during Thursday’s briefing, suggested that The Bahamas’ long-standing real estate conveyancing practices and system be changed to address the 5.25 percent interest charge worries.

Renee Charles, one of the officials, referring to how the process works in other jurisdictions, suggested that The Bahamas adopt a system where conveyancing documents were executed and mortgage lenders released funds at the same time. She queried if financing approvals “would not have been in existence prior to execution of the document”.

“I can explain the position in other jurisdictions,” she said. “There’s a reason for that, right? It is that you would execute the documents at the same time, simultaneously, with the release of the funds from the bank.” This prompted immediate push back from multiple Bahamian attorneys on the call, who argued: “That’s not how it works in The Bahamas.”

Noting that there is nothing in Bahamian law that mandates the process Ms Charles spoke of, they countered that banks and other mortgage lenders require the executed conveyance to be submitted as part of the package for their review to ensure the loan security is perfected before they will release the funds.

Mr Bowe, when asked about Ms Charles’ suggestion, said: “I would smile and just ask the question: Why can’t the Government get a land registry that will allow it to happen in 24 hours?” Laws to move The Bahamas to a system of registered land, which involve creating a land registry, were passed by Parliament under the first Davis administration to replace the existing manual, paper based title search, but this will take years to fully implement.