Residential real estate ‘VAT exempt’ but questions remain
Guardian Business Editor
Published: Oct 08, 2013
Realtors say they are left with more questions than answers in response to government’s indications that sales and rentals of residential homes will be classified as “VAT exempt” under the new tax regime proposed by the government.
Guardian Business has confirmed that it is the government’s intention to classify only sales and rentals of residential homes as ineligible to have VAT applied to them under the new regime.
This suggests that sales and rentals of commercial properties will have VAT applied.
According to some realtors, this leaves the question of whether VAT would be applied to realtor services in relation to sales and rentals of residential homes, and if when applying VAT to sales and rentals of commercial properties, this would be in addition to stamp tax.
Most realtors this newspaper spoke to said they feel in the dark about how the tax will impact their sector, and that the impact could be significantly different depending on exactly how the government decides to treat certain elements.
Peter Dupuch of ERA Dupuch real estate, said: “I need much more information. Originally I sort of had my head in the sand, then I thought ‘Okay, it’s a year away’ and I started trying to find bits of information.
“I’ve been studying how VAT impacted the Barbados situation. They reduced the stamp tax when they (implemented VAT on the real estate sector). I am now wondering if they would leave the stamp tax here because that would be death (for the sector). If you are going to pass something, I feel like the public should be educated on it. They need to get a move on.”
Nick Damianos, of Damianos Sotheby’s International Realty, said “everything is too vague.”
“I really don’t know enough about it. I think that it’s too soon to even say that our services on residential sales and leasing will be exempt from VAT duty. I don’t know what position they will take on the real estate commission and legal fees in making a real estate sale.”
With respect to the potential for VAT to be applied to commercial leases and sales prices, Damianos said he would expect this increase in cost to be “eaten” by landlords at first, but then slowly to be passed onto consumers via increased prices for goods and services they offer.
“I don’t think there’s any doubt that those leases are going to creep up by about 15 percent so the tenants are gong to have to pass that cost along eventually.”
Franon Wilson, president of BREA, said that the association is still “going through all the implications of VAT for the real estate sector.”
“We are in the process of reaching out to the government to have a dialogue with our association to help all of our members understand the full scope as it relates to our industry.”
Wilson said he hopes to have a webinar on VAT for members which will allow all realtors throughout the archipelago to receive information simultaneously from the association on how VAT may impact them.
“After BREA and its members receive all the updates, we’ll be in a much better position to provide feedback” Wilson said. “For right now, if it is the case that residential sales would be exempt, that would be welcomed.”
Damianos said his concern is that the government may be just as unsure of its position on certain issues as it relates to VAT as those in the private sector find themselves to be.
“My suspicion of this government is that all these questions that we’re asking amongst ourselves about what the government intends etc, that they haven’t thought about all these things yet,” Damianos said.