Buying property in Barbados whether be it for a holiday home, an investment for retirement or business, whatever the reasons, our agency is here to assist you through the various stages of the buying process.
The property sales process can be made much easier should you make the right contacts and work with credible professionals that will guide you not only to the best property in Barbados properties for your budget and lifestyle, but also take you through the steps to acquiring what is likely most buyers largest investment outside of their homeland.
Whether you are currently living in Barbados, or looking to invest from overseas, there are several things to consider when buying or selling your property. This Guide will help answer some of the many questions you may have. For additional information, please feel free to contact us directly.
Here are a few guidelines for non-Barbadian buyers of Barbados real estate:
- There are NO restrictions to non-nationals purchasing properties in Barbados.
- A non-Barbadian buyer must first receive permission from the Central Bank of Barbados. This step is merely a formality.
- Vendors are liable for the property transfer tax which is charged at the rate as outlined in the table below.
- Financing is available locally for non-Barbadians, however, various regulations apply.
- There is no Capital Gain Tax in Barbados so investors are not charge for appreciation in the value of their property.
- You must retain the services of an Attorney-at-Law on the island to represent your interests.
Mortgages are readily available to non-nationals and non-residents, from the international banking sector of the banking industry. It is advisable that you contact a local financial institution for their exact terms and conditions.
The remainder of this Guide outlines other considerations to be considered in deciding to invest in Barbados Real Estate. It also gives a very simple outline of the process of buying real estate in Barbados.
Legal Considerations
The Barbados legal system is derived from English common law statutes.
Retaining Legal Advice
Any person intending to buy or sell real estate in Barbados must retain the services of an Attorney-at-Law on the island to represent their interests. The Agreement for Sale, the Deed of Conveyance and the Deed of Transfer must all be prepared by an Attorney-at-Law. The peculiarities of Barbados’ Conveyancing Laws, the absence of any scheme of insurance, and the predominance of unregistered title to land are factors that may render real estate transactions in Barbados potentially risky for the unfamiliar purchaser.
The Agreement for Sale
Once you have found the appropriate property, and the negotiations are complete, the starting point of the sales transaction is the Agreement for Sale, which is usually prepared by the Attorney-at-Law acting for the Vendor. At the time of signing, the Purchaser signs the Agreement in duplicate and pays a deposit-typically 10% of the purchase price. The Agreement, together with the deposit, is then delivered to the vendor’s Attorney-at-law. The Vendor will then execute the Agreement and a copy of the duly executed agreement is then delivered to the Purchaser’s Attorney-at-Law.
Investigation of Title
After the Agreement is signed, the Purchaser’s Attorney-at-Law conducts a search against the title to the property to ensure that the Vendor holds a good legal title to the property and there are no encumbrances such as mortgages or charges of liens affecting the property. Encumbrances may also take the form of unpaid judgments, outstanding water bills, and unpaid land taxes.
Completion of the Sale and Purchase
Once the investigation of title is completed, the Vendor’s Attorney-at-Law prepares the document used to convey the title to the Purchaser. Upon closing, the Vendor’s Attorney-at-Law will normally exchange that document, along with prior deeds, for the balance of the purchase money.
Typically a sale in Barbados should take anything from 3 to 6 months to complete from the time the initial offer to conveyance stage.
Closing Costs
The Vendor of the property will be liable to pay the Stamp Duty and Property Transfer Tax. Legal fees are usually 1.5% to 2% of the purchase price of the property plus applicable VAT.
Taxation Considerations
Land Tax
Land Tax, or Property Tax, is payable annually and is computed as follows: (for the 2015-16 Tax Year)
There is a ceiling of US $30,000.00 where the dwelling house is used exclusively as a residence by the person who owns the land on which the dwelling house is erected. For additional information, please see Barbados Land Tax info.
Property Transfer Tax
Effective April 1st 2007, the land tax rate is 2.5%, payable by the vendor upon the sale of the property. Where the transaction is land only, the property tax is paid on the full amount. However, if the transaction includes a dwelling house, the first BBD$150,000.00 is exempt from the tax, effective April 1, 2008. For additional information, please see Barbados Land Registry.
Stamp Duty
This is payable by the vendor at the rate of 1% on the gross consideration
Personal Tax vs Corporate Tax
The property owner can hold the real estate investment personally or they may set-up a holding company to do so. In either case, so long as the owner and/or the holding company are non-residents for Barbados tax purposes, there will be a withholding tax at a rate of 25% on the gross rental income earned from the property.
It is possible to obtain permission from the local tax authorities to file a Barbados tax return which would include the gross rental income less the related expenses. In such a case, if the property is owned personally, the applicable tax rate is 15% on the net rental income. The rate also applies if a company owns and rents the residential property.
Value Added Tax (VAT)
Where the property is rented on a short term basis and income exceeds BBD$5,000 monthly or BBD$60,000 per annum, the owner will be required to register for VAT and charge VAT accordingly. In Barbados, VAT is imposed on the supply of a dwelling house that is rented to persons for use as a vacation or holiday home at the rate of 7.5%.
The owner may also claim VAT that is charged by suppliers on the maintenance of the property etc. against the VAT charges on the tenants. However, long term rentals are exempt from VAT.
Other Considerations
There is no Capital Gains Tax in Barbados; nor is there any Estate, Inheritance or Gift Tax. The title may be taken in a person’s name or a company may be set up to own the property. In case of ownership by a company, if it is incorporated outside of Barbados, it must be registered in Barbados.
Property Management Fees
Deposits
Contract deposits are usually 10% of the purchase price. A refundable reservation deposit is required if the Buyer is purchasing at the pre-construction phase. Stage payments are then made in accordance with the sale agreement schedule.
Bank Accounts
A non-national may open a bank account with the proper identification and bank and professional references. Anti-money laundering legislature requires non-nationals to provide evidence of Source of Funds.
Agency Fees
The unofficial commission rate for real estate agents is 5% of the sale price plus applicable VAT.
Residence and Exchange Controls
Non-residents are required to apply to the Exchange Control Authority for permission to bring in and register their foreign currency for the purchase of property in Barbados. This is to facilitate the future repatriation of funds. Failure to do so could prevent or delay such repatriation. In the statement made by the Prime Minister and the Minister of Finance on March 14th 2007, it was proposed where there was sale of a property by a non-resident to another non-resident and there is no foreign exchange loss, the proceeds of the sale can be repatriated without restrictions.