July 2018 | By Chelon Carr-Newbold
2018/2019 Government Budget Communication: Tax Reforms
This is an overview of the new tax reforms announced in the 2018/2019 Budget Communication by the Minnis Administration and is only intended to give the main highlights.
Some of the tax reforms came into effect on 1st July, 2018 but certain others will be implemented at a later date to give certain key industry stakeholders additional time to make the transition.
Value Added Tax (VAT)
- Most notably, VAT has increased from 7.5% to 12%. This increase came into effect on 1st July, 2018.
- A special VAT increase transition period has been extended to tourism industry stakeholders to allow all hotels, resorts, tour operators/ground operators, attractions and other key tourism related establishments to make a smooth transition to the VAT increase.
- Elimination of VAT on breadbasket items, medicines, residential property insurance, residential electricity bills at or under $100.00 and water bills at or under $50.00.
- The elimination of VAT on breadbasket items will come into effect on 1st August, 2018.
- These amendments are reflected in the Value Added Tax (Amendment) Bill, 2018.
Here is the link to the draft legislation
Real Estate Transactions
- The elimination of VAT on the sale of real estate came into effect on 1st July, 2018. Only stamp tax will be payable at the following rates:
- 2.5% on transactions up to $100,000
- 10% on transactions above $100,000
Essentially, this means that the transfer tax on the sale of real estate remains the same at 10% but the VAT increase of 12% only applies to real estate commissions and legal fees.
- Stamp Tax Exemption for first-time homeowners has been extended for five (5) years to 30th June, 2023.
- These amendments are reflected in the Stamp (Amendment) Bill, 2018.
Here is the link to the draft legislation - City of Nassau Revitalization (Extension of Time) Order, 2018 has been extended for one (1) year to 30th June, 2019.
- Family Islands Development Encouragement (Extension of Time) Order, 2018 has been extended for one (1) year to 30th June, 2019.
Real Property Tax
- The following tax reforms came into effect on 1st July, 2018:
- Increase from 1.5% to 2% on foreign-owned vacant land. This tax increase is the result of the Government’s effort to discourage land speculation and to encourage the development of vacant land.
- “Owner-Occupied” property was redefined as property that is occupied and resided in by the owner exclusively on a permanent basis for six months or longer.
- VAT was imposed on vacation home rentals.
- A person who owes outstanding real property taxes and surcharges but is unable to pay the same may apply to the Minister to convey the property to the Treasurer to satisfy the unpaid sums. It should be noted that no stamp duty will be payable on such conveyance.
- By redefining “owner-occupied” property, the Government sought to improve the tax yield from homes used for commercial purposes. However, this reform effectively removed the annual cap of $50,000 on real property taxes payable on such property which would have threatened the future viability of the second home market. As a result, the Government was forced to consult with a range of stakeholders and have now decided to revert to the previous definition of owner-occupied property which will be implemented by an amendment to the legislation once Parliament resumes after the summer break.
The increased tax on undeveloped land and the imposition of VAT on vacation home rentals will remain.
Gaming Tax
- The gaming taxes payable by the holder of a gaming house operator license will be based on the revenue collected at the following rates:
- 20% on revenue up to $20M
- 25% on revenue from $20M – $40M
- 30% on revenue from $40M – $60M
- 35% on revenue from $60M – $80M
- 40% on revenue from $80M – $100M
- 50% on revenue above $100M
- 5% taxation will be applicable to gaming patrons on both deposits at gaming houses and on-line games/digital sales.
- These amendments are reflected in the Gaming House Operator (Amendment) Regulations, 2018 but the implementation of these tax reforms has been delayed to allow for a special transition period.
- Here is the link to the draft legislation
Business License Fees
- 0.75% business license fee is now applicable to all hotels with 10 rooms or more. This rate was already applicable to hotels with a turnover above $400 million. Now smaller hotels can benefit.
- These tax reforms came into effect on 1st July, 2018 and are reflected in the Business License (Amendment) Bill, 2018.
- Here is the link to the draft legislation
Import Duties
- Exemption of duty on materials used for renovation, repair and upgrade of dilapidated buildings has been extended for two (2) years.
- Elimination of duty on certain food products.
- Elimination of duty on solar kits. Solar panels are already duty free but related elements will now be duty free as well.
- Elimination of duty on airplanes and helicopters.
- Reduction in duty to 10% on electric/hybrid vehicles valued at $50,000 and under. This reduction does not apply to luxury vehicles valued above $50,000.
- 10% duty on electric motorcycles (no value limit).
- 25% duty on new “small” vehicles up to 1500cc.
- These tax reforms came into effect on 1st July, 2018 and are reflected in the Excise Bill, 2018. Here is the link to the draft legislation