The process of purchasing property in Barbados is similar to the UK because the island’s laws are based on the English system. However, there are important differences that needs to be considered when you decide to purchase a property.
Through my extensive experience of dealing with professionals on the island and the mortgage process I am able to document this article. When buying property in Barbados, buyers need to be aware of the taxes and costs involved.
Legal fees
The legal fees for non-contentious matters in Barbados are governed by a statutory scale which prescribes the minimum fees charged. The fees for preparing and completing a conveyance of unregistered land (which will normally be the case) will be as follows:
- Up to Bds$25,000 – Bds$1,000
- On the next Bds$75,000 – 2.5%
- On the next Bds$100,000 – 1.5%
- On the next Bds$300,000 – 1.25%
- Thereafter 1%
Fees for conveyancing of registered land will be one-third of the scale.
There will be additional fees and expenses if the transaction involves borrowing, based on the amount of the borrowing.
Land taxes
The land tax year runs from April to March. Rates vary between nil and 0.75% of the value of the property, depending on the value, with a maximum land tax payable of Bds$60,000. The seller will have prepaid the land taxes before completion and a buyer will be responsible for the months between completion and March of the following year.
Transfer taxes and stamp duty
Transfer taxes and stamp duty are paid by the seller. Stamp duty is charged at a rate of 1% and transfer tax is 2.5% of the gross consideration above Bds$50,000 (the first Bds$150,000 being exempt if a building is included in the sale).
The Exchange Control Regime restricts the export of profits from returns on investments. As the law currently stands, the Central Bank will allow an investor to repatriate the original purchase price and a mark-up of 4-8%. The balance can be repatriated in installments of US$100,000 per annum. The Central Bank has discretion to approve the repatriation of funds for example for senior citizens or where the money is required for medical expenses.
Offshore company
Non-resident purchasers will often use an offshore company to hold real estate in Barbados in order that transfer tax and stamp duty are not payable on a subsequent sale. This also avoids having to contend with the Exchange Control Regime as the sale price will be collected in the jurisdiction of the offshore company on the sale of the shares in the company.
The BVI is one of the favoured jurisdictions for this purpose. This will mean selling the property to a purchaser who is non-resident and is willing to buy the company which owns the property, as opposed to the property itself. This will not generally be a problem.
There will be additional costs involved in establishing and maintaining an offshore structure. It will also be necessary to register the offshore company in Barbados.
Personal tax
Capital gains are not taxed in Barbados.
Income can be taxable in Barbados in the hands of residents and those who are ordinarily resident. Barbados operates a remittance basis of taxation in a similar way to the UK. While an individual resident or ordinarily resident in Barbados will be liable to Barbadian income tax on a worldwide basis if they are domiciled in Barbados, if they are not domiciled in Barbados, foreign income will only be subject to Barbadian income tax when received in Barbados.
Non-domiciled purchasers can choose how to leave their Barbados real estate in their will. The Succession Act, which applies to Barbadian domiciliary, prescribes entitlement for spouses and disabled or minor children.
Conclusion
The final point that needs to be noted is that the legal process in Barbados on average takes three to six months. This can be heavily influenced by who you decide to hire to complete the legal process. Work closely with your financial provider who can guide you as to the law firm that has consistently completed work in a reasonable time frame.
If you have any additional information or want to see other topics being explored on other areas of financing in Barbados please feel free to leave your comments below.
If you have any questions please do not hesitate to contact us at support@afbconsultingservices.com
Until next time LinkedIn family take care and God bless!
Prepared by
Sherryann N Bourne