What To Know About Taxes Before Selling Your Property In Barbados

Taxes To Be Paid When Selling Property in Barbados

In Barbados, the seller is required to settle certain payments prior to the official transfer of title to real property.

A seller’s completion statement will typically outline the list of expenses payable in order to conclude the sale of the property.

In addition to closing costs that are required to be paid on completion of the sale, some of the charges that will need to be settled include government taxes. These include:

• Stamp duty

• Property transfer tax and;

• Land tax.

In this article, we will take a look at these three government charges and how they are calculated.

1.     Stamp Duty

Stamp duty is a government tax that is charged on the instrument transferring property. In the case of a property sale, this instrument is known as the Deed of Conveyance.

Stamp duty must be paid in order to ensure that the deed is validly recorded or registered. The Deed of Conveyance must also be stamped within 30 days of execution or completion.

As such, even though a conveyance may be signed by the parties, in order for it to be a valid instrument, the Registrar will not record or register the document unless the stamp duty has been paid.

Calculating Stamp Duty

Details of how stamp duty is calculated can be found under the Schedule of the Barbados Stamp Duty Act, Cap. 91.

Stamp duty charges payable by the seller will depend on the fair market value of the property or on the value mentioned in the conveyance, whichever is higher. In the case of a deed of conveyance, the charge would be $10.00 for every $1,000 or part thereof (or 1% of the value).

For instance, the deed of conveyance for a property valued at $350,000 would incur a stamp duty of $3,500.00.

2.     Property Transfer Tax

Property Transfer Tax (‘PTT”) is also to be paid on the transfer of title to property. This is the tax charged on the change of ownership of the property.

Calculating Property Transfer Tax

According to the Barbados Property Transfer Tax Act Cap. 84A, property transfer tax is calculated at the following rate:

• Where the property consists of land alone - 2.5 % of the market value or sale price of the property (E.g: a property with vacant land having a value of $50,000.00 will incur a PTT of $1,250.00)

• Where the property consists of land and a dwelling-house or other building – 2.5% of the market value or sale price of the property (with the first $150,000 being exempted) - (E.g: a property with land and a house with a value of $300,000.00 will incur a PTT of $3,750.00)

 3.     Land Tax

Prior to the transfer of title, all land tax charges are to be paid up. The most recent land tax bill, land tax receipt and land tax clearance certificate all form part of the closing documents for the property sale.

Calculating Land Tax

You may refer to your land tax bill to determine the amount of land tax due for the tax year. The land tax bill outlines the exact amount due for the tax year, along with any outstanding arrears to be paid, if there are any.

Land tax rates are charged based on the property type and will depend on if the property consists of: a) improved land for residential purposes; b) improved land for non-residential purposes or c) vacant land. To learn more about how land tax rates in Barbados are calculated, click here.

Land tax payments are due on the 31st day of March of each year. A penalty would be incurred for late payments at a rate of 5% of the unpaid tax plus interest calculated at the rate of 1% per month on the principal and penalty. 

Conclusion

As required by law, in order to successfully transfer title to the buyer, the above government charges, along with closing costs will need to be settled.

You should therefore consult with your legal advisor to confirm the relevant taxes that that will be applicable when seeking to transfer title of your property in Barbados.

Questions?

Have questions about the above or related queries about property transfers in Barbados? To find out more, you may contact our office and we would be pleased to address your concerns. Click here to get in touch.

Or want to learn more about the conveyancing process in Barbados? Check out the following articles:

FOR BUYERS: Ultimate Guide To Buying Property in Barbados: A Step-by-Step Process

FOR SELLERS: What Paperwork Do I Need To Sell My Property in Barbados?