The Tribune

By NEIL HARTNELL

TRIBUNE Business Editor

nhartnell@tribunemedia.net

THE BAHAMAS Bar Association has branded as “completely impractical” the Government’s plan to impose a 5.25 percent interest charge if VAT due on real estate sales is not paid within 21 days, warning it fails to “match the current commercial reality”.

Khalil Parker KC, the Association’s president, in a September 28, 2026, letter to Michael Halkitis, minister of finance, called for the new levy’s introduction this coming Monday to be “deferred” to allow further consultation with practitioners since it will likely catch “the vast majority” of Bahamian mortgage-financed home buyers and cause “significant disruption to the current mode of doing business”.

With the Department of Inland Revenue (DIR) asserting that the 21-day period starts running from the moment the seller or buyer in a property transaction signs the conveyance, Mr Parker and the Bar warned that the time required for banks and other lenders to review all mortgage documents, make sure everything is in order and that their security is protected, is just one step in the process that - by itself - can take more than three weeks to complete.

Meanwhile, Andrew O’Brien, chair of the Bahamas Bar Association’s real estate committee, separately told Tribune Business when contacted yesterday that multiple real estate sales already in process for more than 21 days but yet to complete could be caught by the tax authorities’ proposed implementation of the new levy from Monday, October 5.

Asserting that all real estate-related law and tax changes need to be accompanied by at least a 90-day transition period, so that the market escapes undue disruption and all parties have time to adjust, he added that the uncertainty means attorneys are also unable to properly advise Bahamian and international clients on what their fees and costs are likely to be.

“I remain hopeful the Government will take a pause,” Mr O’Brien said. “There’s got to be dozens and dozens of transactions in process that have not allowed for this. They are going to be caught, having dated their conveyances as they normally do, and are already maybe over 21 days and somebody has to pay this new fee.

“For any change to a real estate transaction, there has to be at least a 90-day transition period. Lawyers build flexibility into a contract in case the Government changes the laws, so it would be a split 50/50 between the purchaser and the seller, but you cannot do that in a bank-financed transaction.

“It’s not a good look for our jurisdiction. We cannot tell someone what to expect for their [real estate] fees, and attorneys will not look like we know what we’re doing because we cannot say what the fees are.”

Tribune Business previously revealed that the interest charge, if implemented by the Department of Inland Revenue on schedule, threatens to, in effect, automatically push all mortgage purchasers and international home buyers into incurring this extra charge through no fault of their own.

This is simply because of how The Bahamas’ conveyancing and property transaction system works. Department of Inland Revenue officials, during a briefing with Bahamian attorneys on September 16, 2026, to alert them to the imminent change, said the 21-day time period will start running from the date the conveyancing document is executed.

However, once executed, the conveyance together with all other necessary documents, including title opinions and searches, has to be sent to the bank or other lender if mortgage financing is involved. The 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.

This alone would push a mortgage-financed real estate deal beyond the 21-day timeline for VAT to be paid to the tax authorities on the sale, almost inevitably triggering the new 5.25 percent (Prime plus 1 percent) charge. And, once the bank has completed its role in the process, further time is often required for the seller to receive the purchase proceeds and release all claims to any interest in the property for the deal to close.

These challenges were highlighted by the Bar Association and Mr Parker, who advised Mr Halkitis: “As our system currently works, in particular with respect to transactions involving the issuance of mortgage proceeds or the signature of parties outside of The Bahamas, a 21-day period for stamping a document from the date of execution is, in most circumstances, completely impractical and does not match the current commercial reality.”

Calling for further consultation with the Association, its member attorneys and other professions involved with real estate sales, they explained why the 21-day deadline for VAT to be paid on real estate sales will likely impose a seemingly unfair penalty on many transactions.

“Closing deeds inclusive of conveyances and mortgages are presently dated and signed before they are submitted to a financial institution for funding of a purchase,” Mr Parker and the Bar Association explained. “The deeds are often held in escrow for extended periods while the bank completes its final due diligence with the borrower, or while parties wait for foreign formalities to be completed for instruments that are signed outside of The Bahamas.

“The banks' position is that the documents must be dated before the banks will undertake their final due diligence before disbursing funds. This also allows the parties to complete transactions from their offices at convenient times versus attending a bank, which flexibility creates an important efficiency for the real estate industry.”

They then added: “The date on the escrowed deeds can often differ from the actual closing date by a number of weeks, making the 21-day interest threshold very difficult to achieve.

“Using just one example, for the vast majority of local mortgage-backed purchase and financing transactions involving Bahamian buyers getting personal mortgages from Bahamian banks, it is a standard and necessary practice that the conveyance be dated and signed, and delivered in escrow only, so as to facilitate the buyer, as borrower, having their loan proceeds advanced by their bank for use to pay the seller the purchase price balance and release the closing deeds from escrow.

“The period required for submission of a package to a bank, for completing the bank's internal review and approval process, for arranging for drawdown of the loan proceeds, for having a property vacated, for arranging handover of possession and escrow release, and for disbursing all payments, including VAT, often takes many weeks after the conveyance is first signed, with the effect that the conveyance and mortgage are already older than 21 days by the point in time when they can be presented to the Department of Inland Revenue for stamping,” Mr Parker and the Association continued.

“This process and these steps could comfortably be done within 180 days. Similar issues arise with extended escrow or closing periods, where parties are overseas and the closing documents must be sent to and from The Bahamas or foreign notarisation and apostille certificates must be arranged for the signatories.”

The Department of Inland Revenue previously told Tribune Business that it is merely implementing what is mandated by law when it applies the new interest charge with effect from October 5, 2026, to coincide with the upgrades to the VAT Stamp payment portal.

It said it is enforcing the VAT Act amendments, passed in June 2025 by Parliament but not implemented until now, that introduce the new 5.25 percent interest charge. These changes, to the VAT Act’s section 47A, stipulate that any tax “not paid by the date on which it becomes due and payable shall bear interest in respect of the outstanding amount at a rate of prime plus 1 percent”.

Real estate used to be exempt from such charges, but the 2025 reforms eliminated this waiver. “Where tax is payable on a supply of real property, the liability to pay interest shall commence 21 days after the date the tax becomes due and payable,” the VAT Act changes stipulate. This is what the tax authorities are now moving to enforce.

Mr Parker and the Bar, in their letter, said there was ”regrettably” no prior consultation with the Association over the levy’s planned introduction nor notification of the September 16 meeting. They urged that “a protocol” be agreed so that, in future, it receives “advance notice” of such key issues.

Acknowledging the VAT Act reforms, which the Department of Inland Revenue is now seeking to enforce, Mr Parker and the Association wrote: “While we acknowledge the delayed implementation of this amendment, we anticipated that this reflected an acknowledgment that the necessary discussion and dialogue with stakeholders would take place in advance thereof.

“This amendment ought not to be enforced without substantive consultation with the Bar Association and other key stakeholders…. We appreciate the Government's desire to collect all outstanding taxes at the earliest possible date. However, consultation with the Bahamas Bar Association and key stakeholders is appropriate and necessary to avoid creating significant disruption in the current mode of doing business.

“Our members do not wish to have an adversarial relationship with Department of Inland Revenue on proposed policy changes, and note that they play a critical role in facilitating the assessment and collection of VAT on real property transactions,” Mr Parker and the Association added.

“We stand willing to provide our input so that any changes can be implemented as smoothly as possible without unnecessary disruptions to long-standing real estate lending and conveyancing business practices.

“We therefore request that enforcement of this interest charge be deferred so that we, along with our fellow stakeholders, can make recommendations to the Ministry of Finance on how tax collection can be expedited for VAT on conveyances and mortgages.” They requested a meeting between the Bar Association team and top Ministry of Finance officials to be arranged speedily.

The Department of Inland Revenue said it will ensure “taxpayers are not disadvantaged” by subtracting, or deducting, from the 21-day timeline any days, weeks or months that a transaction’s completion is delayed by its own actions. This would typically involve the tax authority reviewing, or holding on to, a conveyance if it has queries over the transaction or is challenging the amount of VAT the parties believe is payable on the deal.

However, Mr Parker and the Association said such verbal promises and assurances have yet to be translated into a “formal policy statement or guidance note”. And they reiterated that there is an already-existing 10 percent interest penalty in force, and applied to, real estate deals where conveyances are not brought forward for stamping - and VAT remains unpaid - for more than six months or 180 days.