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GST on property sales?

Posted By: Sir Isaac Newton

GST on property sales? - 12/12/05 07:06 PM

Can anyone clarify if another tax will be levied on property sales?

SIN
Posted By: CHOOCHOO

Re: GST on property sales? - 12/12/05 11:22 PM

From what I have been told that would be the case for "non-Belizeans" or for official non-residents buying property. It's a pretty ugly amount when you start to do the math.
Posted By: Pam&Dave

Re: GST on property sales? - 12/13/05 01:01 AM

SIN / I am going to be talking about that very subject next week with Herm Penland at Southwind. I'll let you know what's up. Man, it could mean lots more money for the stamp duty at closing time. Rules might be different if you are receiving shares in a corporation instead of clear title. I'm keeping my fingers crossed.
Posted By: Loansum-Al K

Re: GST on property sales? - 12/13/05 03:55 AM

I've asked this on a different thred but received no answer..........what is the difference between "receiving shares in a corp.. instead of clear title" in reference to the transfer tax?!
Posted By: Chris

Re: GST on property sales? - 12/13/05 05:48 AM

Regarding GST, yes, under the present version of the Bill (which hopefully can and will be changed) GST will apply to the buyer of the following types of property sale:

Any newly built condo, house, villa, ie. you're a developer, buy a piece of land, build homes on it, sell them. Your buyers will pay the 15% Transfer Tax AND 10% GST. Except they won't want to pay 25% tax which means they'll buy in Panama or Costa Rica instead.
Any newly remodelled house that was purchased for the purpose of remodel followed by immediate resale.
Any commercial property such as a hotel.

It's a very alarming tax which will make it almost impossible for those wanting to own their own home in Belize to justify buying a newly built home. They would be better off buying an already-lived-in home which is not taxed under this new system.

Theoretically even homes newly built by DFC will "attract" this most heinous new tax.
Posted By: Chris

Re: GST on property sales? - 12/13/05 05:52 AM

Pam&Dave, if you make a real estate purchase and it falls under a GST-taxable category you pay 10%. It has nothing to do with the Stamp Transfer Tax. The GST won't disinguish between corporations, individuals, Belizeans or Aliens.
Posted By: tincup

Re: GST on property sales? - 12/13/05 11:43 AM

This is not good news. The frustrating thing about working on a long term plan for living in Belize is that the "rules" are constantly changing. At some point it becomes too risky and uncertain to put hard earned investment dollars into a system that is in constant flux. If they impose this tax on new construction and on all commercial sales I think you will see a dramatic drop in transactions, or more elaborate schemes by individuals to circumvent the taxes and duties. Neither of these will accomplish the GOB objective of more revenue.
Most of us still prefer to play by the rules, but if you make the rules too difficult we will play somewhere else.
Posted By: Sir Isaac Newton

Re: GST on property sales? - 12/13/05 03:15 PM

Getting worried now.
Posted By: Lan Sluder/Belize First

Re: GST on property sales? - 12/13/05 04:39 PM

The real estate people I've talked with in Belize all seem concerned -- from somewhat to very -- about the new GST. Those who have studied it seem the most concerned.

In theory, on applicable properties, the 10% tax will be paid by the SELLER, not the buyer as with the stamp duty.

But of course in the end all fees and taxes are in effect paid by the buyer, as the costs tend to get built in to the selling price.

The GST bill as currently written is long (almost 70 pages) and complex. I've not studied it carefully, but it looks to me as if one possible issue is to exactly what real property it applies. It seems to me the definitions of applicable property are a little fuzzy.

The GST doesn't go into effect until April, and the bill may undergo some changes.

--Lan Sluder
Posted By: Pam&Dave

Re: GST on property sales? - 12/13/05 05:14 PM

Real estate people and developers trying to market and sell new homes and projects are going to have a hard time explaining the latest added tax. There are lots of people with the funds to invest in Belize and boost it's economy, however, as tincup stated,"the "rules" are constantly changing". Foreign investors must have faith in the government and a certain "comfort level" before they will part with their money. The Belize government is testing that faith and pressing the "comfort level" to an uncomfortable position. I certainly hope the reality becomes clear that imposing frequent and dramatic tax increases such as this one will have a very damaging long term effect. Only time will tell.
Posted By: Chris

Re: GST on property sales? - 12/13/05 05:32 PM

Lan, not so, the BUYER will pay the 10% GST. It's not the same as the Belize Business Tax.

(BTW, there's a hot rumour that the Belize Business Tax is about to be raised for developers from 1.75% to 15%. Talk about the end of development, job creation, tax revenues in Belize.)

Back to GST, a seller HAS to issue a receipt to a buyer showing the selling price AND the GST separately. There is no way to hide from the Buyer that they are paying the GST.

Let's run through it now assuming worst case scenarios:

You want to buy a new condo in Belize. You have a fair idea of the market value. You think it should cost $200,000US.

BUT! your developer now has to add 15% business tax to his price (no way for him to "swallow" that), he has to charge you 10% GST on top of the selling price, your lawyer will charge you 2% closing fees and you'll have to pay 15% Stamp Transfer Tax on the selling price. So, what you think ought to cost $200,000US will now cost you around $290,000US. Any takers?
Posted By: Pam&Dave

Re: GST on property sales? - 12/13/05 05:47 PM

Chris / Maybe the government wants to halt new construction. That appears to be the case.
No, $90,000.00 tax/fee to close a deal on a $200,000.00 condo. That is not attractive.
Posted By: Amanda Syme

Re: GST on property sales? - 12/14/05 09:09 PM

Just to clarify a few quick points as they pertain to real estate transactions:
1. GST bill is a proposal - it has not passed yet. When it is refined it will be passed as an act - and then it will be law.
2. The business tax for developers changed to 15% quite a while ago, the same time the real estate business tax went up to 15%. By way of appeal many developers have managed to continue paying the old 1.75% rate, but the law is 15%. Business tax is paid by the entity that is a registered business in Belize, not the buyer.
3. The stamp duties (commonly referred to as transfer tax) is 5% of the purchase price regardless of whether you are purchasing stock shares or titled property, for Caricom citizens and 15% of the purchase price for non-Caricom citizens. If you need to ask - you aren't one.

Yes the taxes are tough right now, and the proposed taxes even tougher. Common sense will eventually prevail, but times might get a little tougher before they get easier.
Posted By: Chris

Re: GST on property sales? - 12/14/05 09:09 PM

Share transfer tax...enforcement of a new law that increases the tax from 5% to 15% is now being enforced as of this week....which now means we effectively have Capital Gains Tax but you don't actually have to make a profit to pay the full 15%.

What a disaster. Having a government whose best friends are Chavez and Castro is simply the end of commerce in Belize and will spell an economic crisis of massive proportions. Presumably our government is behaving like Castro and Chavez because working people have a large voting bloc and they think they can win the next election based on populist policies.

It's easy, stick it to "rich" gringos and Belizeans, make it seem like they're paying all the taxes, the workers will rally to the government's side. Well, guess what, if there's no work because no one wants to invest in a country that practices disincentives to economic growth the workers will be poorer because they will be unemployed.

And if no-one is going to invest in Belize the government won't collect taxes.
Posted By: SP Daily

Re: GST on property sales? - 12/14/05 09:15 PM

Now here's a tax that makes more sense:
http://news.bbc.co.uk/1/hi/world/europe/4529574.stm
Posted By: Chris

Re: GST on property sales? - 12/14/05 09:20 PM

There is NO WAY a developer can tolerate a 15% business tax in the same way that realtors can. The profit margins, especially for someone like me who wants to build beautiful homes and sell them for a low profit margin in order to appeal to working/middle class folk, won't allow me to "swallow" the business tax. I had plans for 17 new homes and I'm not going to bother now. It's not worth it.

If people like me are going to say "screw it, I'm not going to build" it means construction workers are going to start looking for work and when they don't find it they will have to look for other ways to feed their families.

One or two of these will resort to theft and if there is a crime spree because of it we will probably end up with another murder, another "island crisis" similar to what happened earlier this year.

It is important to look at these matters from the perspective of society as a whole, not just a cozy office. It's easy to say "I'm all right, Jack" but unfortunately Jack, and Pedro and Javier and Juan all have families to feed.

Again, this will all result in a net loss of revenues to the government which means they're not being very clever.
Posted By: Corona Steve

Re: GST on property sales? - 12/14/05 09:28 PM

Jesse, sounds perfect, and, by the way, was looking for you at Calander Girls Party at Fidos, Sat nite, could not locate you.
Met your neighbor Boatyard Tom on Monday.
Bridge progress looks good.
Posted By: Corona Steve

Re: GST on property sales? - 12/14/05 09:58 PM

Please, let me clearify my position, it related on the Porn part only.
I am not for more taxes, and agree with others on this site, it would kill all Dev in all of Belize, not just AC.
Posted By: Amanda Syme

Re: GST on property sales? - 12/14/05 10:19 PM

GST and Business tax are 2 completely different subjects. Capital gains tax is not the same as share transfer stamp duties - but again we digress.

It is extremely unfortunate that the Government has had to resort to some harsh measures in order to close a number of loop holes that have allowed too many developers and speculators to get away without paying one penny of tax on real estate transactions for decades. It finally came to the point where the flood gates had to be closed.

The tax department has come to a full realization that the developer 15% business tax rate cannot be levied or sustained. Do you actually KNOW any developer that paid the full rate???? I doubt it.

The tax department is reveiwing the GST bill right now and welcoming and encouraging input from the business community.

I understand that the rate is most likely going to be dropped from the proposed 10% to 9.5%. This means that the sales tax currently being charged at 9% will be going up to 9.5%.
Posted By: Chris

Re: GST on property sales? - 12/14/05 11:50 PM

With the GST it's not the rate of tax, rather it's what it'll be applied to that will be hurtful to development. Most new residential developement will cease.

The developer business tax of 15% was shelved earlier this year (shelved but not dropped) by the government after they heard it from major businesses in Belize. THAT'S why it was never charged by developers at that rate, not because they were dodging it. Developers were told to pay 1.75%. I'm certain the government is bringing it up again in order to offer its cancellation to try and make the GST on residential developments seem acceptable.

Amanda, I do agree with you, there are some developers who haven't paid any tax at all, they've build and sold MILLIONS of dollars worth of property, I agree that they owe big time but I object most strongly to having to pay their arrears myself. So should you. But, consider this: If the government haven't been able to enforce their existing tax laws on these people how will they enforce higher taxes?

If all real estate transactions were valued properly and then taxed at just 5% it would be good for everyone, government, developers, employment, investors, EVERYONE. Belize would be an exciting country to invest in. 5% across the board would simplify everything from collection to enforcement. If it could be enforced strictly, no exceptions, Government would make a lot more tax revenue. Not sure they'd manage the extra income properly, though. See below.

You're right, Amanda, Share Transfer Tax or Property Stamp Transfer Tax or GST or Business Tax are not the same as Capital Gains Tax. In reality they threaten to be much more insidious. Capital Gains Tax at least has the advantage of only having to be paid once you've actually made a profit on a major transaction.

The positive influence in any real estate transaction is the buyer. If they feel they're going to be paying 25%-40% tax when they buy a new home they will cancel their plans.

I don't think the problem lies so much with how much tax revenue is generated. Everyone is taking it for granted that this government is broke because they don't collect enough tax. The real reason the country is broke is that government ministers have horribly mis-managed the country in favour of themselves, their cronies and hacks, to the great detriment of Belize. Hundreds of millions in defaulted Government guaranteed loans, massive investment with tax dollars in the cruise ship industry, duty-free concessions being granted to those who don't need them etc. etc.

I'm rambling now, what do I really care, it's just the end of investment in Belize. Doesn't mean much to me, I can leave anytime.
Posted By: ambergrishog

Re: GST on property sales? - 12/15/05 12:44 AM

As a recent buyer, I have heard nothing of the above referenced tax. An omission, a mistake, whatever. It is most disconcerting. Since the time involved in the real estate transaction is long, and the rules of the game change more frequently, this is a disturbing issue. Yes Belize is paradise....but...the frequent changes in the rules of engagement are troubling at best. Issssh.
Posted By: shuffles

Re: GST on property sales? - 12/16/05 02:07 PM

This whole thing is frightening. Is there a place on the web to view the proposed Bill? Does anyone know if there is a provision to "grandfather" agreements to purchase prior to the new stamp tax and the GST? Sure does change the cost of things............. confused
Posted By: SimonB

Re: GST on property sales? - 12/16/05 02:15 PM

http://www.printbelize.com/content/pages/303.php
Posted By: Lost Irishman

Re: GST on property sales? - 12/16/05 05:24 PM

Thanks for the link Simon - looks like a little "light" reading
smile
Posted By: SimonB

Re: GST on property sales? - 12/16/05 05:33 PM

I hope they have some "experts" in the tax office to answer questions. I seriously doubt it though.
Posted By: WhiteWater

Re: GST on property sales? - 12/16/05 06:24 PM

SimonB, do you mean that there are no experts to help? Or that there are experts, but their services cost a pretty penny? I'm just curious. In the states, everyone says 'of course you should consult your CPA...' but no one says that here.
Posted By: Lost Irishman

Re: GST on property sales? - 12/16/05 07:29 PM

Looks like investors in property will be paying the Land Transfer (Stamp Tax) of 15% and included in the purchase price will be the GST of 10% (Part VIII, item 90 for those of you keeping score & attributed by Lan to be paid by seller). Add this to the "regular costs" - attorney, etc. and it could end up around that 30% mark. It appears that the GST (10%) could act as a kind of "Capital Gains" tax in that it must be includued in the price of the item (or service), also, unless I am reading it incorrectly, it may also act as an inheritance tax (P I, item 7(h)), as it appears that it applies to the transfer between "related persons" and the determination of Fair Market Value. It looks to be one of those "sweeping taxes" used by governments to quickly add revenue to the coffers. They figure out what might be out there they have missed and pick it up under one umbrella. It looks that they are essentially expanding the existing sales tax - which would then be repealed upon adoption of the GST (P VIII, item 98). Many times the "sweeping" portion doesn't last long (a few years), but would/should have an impact on the investor who is looking in the next couple years (me). A tough one that I will be watching closely.

-LI
Posted By: SimonB

Re: GST on property sales? - 12/16/05 08:52 PM

The way I look at it, if there's to be a major tax change I should be able to go to the tax office and be able to talk to someone for free about how the tax applies to my business. Problem is the likelihood of that being fact is probably slim to none.
Posted By: Lost Irishman

Re: GST on property sales? - 12/16/05 09:11 PM

Hear, hear, Simon

Hopefully common coutesy AND common sense prevail -

Buy you a pint at the SG Pub in 28 days and you can tell me if you've had any luck!

- LI
Posted By: SimonB

Re: GST on property sales? - 12/16/05 09:18 PM

Deal!
Posted By: shuffles

Re: GST on property sales? - 12/16/05 10:51 PM

Thanks for the link Simon.....looks like after I read it I can put it next to the "Internal Revenue Code" for those sleepless nights! Didn't go to the SP meeting on GST the other day b/c I figured it would be like herding cats. Seems rather ingenious timing by the powers that be, considering that they may be on the "outs" after the election. Best to get yer coffers and pockets full now for slim days ahead.

Seriously, can anyone tell me the reason.....I'm sure there is one, somewhere, that we are not to tell the consumer that the government has added a 10% tax? We are just supposed to add it to our price? So it appears as if we are just jacking up our prices? Or, better still, do we just eat the tax and charge the same rate we have been? Seems as if it is a lose-lose situation for everyone, businesses, residents and tourists alike.
Posted By: SimonB

Re: GST on property sales? - 12/16/05 10:56 PM

Psychological, if you can't see it then the government didn't put it there. Something really does need to be done but I don't know if this is the answer. Hopefully it will be fine tuned in the end in such a way as to not hurt one of our most important resources - tourism.

They really need to look at the real estate side, driving away investment will trickle down and affect all sectors of the economy. Better to have a transparent fixed percentage tax on real estate that covers all existing fees and at an amount that the market will bear along with providing benefit to the goverment coffers. Won't happen though, too hard to take the toys away from the kids.
Posted By: lacysbeach

Re: GST on property sales? - 12/17/05 10:48 AM

It used to be that" If You Build It, They Will Come." Now , You might not be able to say that because, if taxes get so high, Why would we want to build it there? All the rest of the talk means nothing to me, except... We love it there, but if it becomes to costly, we'll go further south!!
Posted By: Sir Isaac Newton

Re: GST on property sales? - 12/19/05 02:45 PM

Well, perhaps:

People stop buying,
developers stop building,
visitors stop visiting,
stores stop delivering,
condos stop selling,
timeshares stop selling,
taxis stop running,
barges stop running,
dredges stop dredging,
mangroves grow back,
ex-pats move back,
home,


and San Pedro returns to a quiet sleepy fishing village.

hmmm???
Posted By: shuffles

Re: GST on property sales? - 12/19/05 02:55 PM

Think you can take the "progress" away without reprocussions? The quiet sleepy fishing village sounds great except when you insert "poor". While the prospect doesn't seem all that bad to some of us, me thinks the San Pedranos have become used to a certain level of economic affluence, which, of course, would be gone....
Posted By: Sir Isaac Newton

Re: GST on property sales? - 12/19/05 03:15 PM

perhaps what a few may want:

no bridge needed
no paved roads needed
no illegal workers
no timeshare marketers
no crime
no need for a road up north
no need for so many docks
no large amount of vehicles needed
less boat traffic
less dust
less mud
less drugs
less police
more fish
more clean beaches
more palm trees
more quiet

Ya' know, thanks to the local islanders for welcoming us and letting all this development happen in the first place.

Merry Christmas!

SIN
Posted By: Sir Isaac Newton

Re: GST on property sales? - 12/19/05 03:19 PM

The thing is shuffles, "poor" in material assets may result in being "rich" in: family, health and happiness.

Personally I'm not sure. Just a different perspective, that some may not share.

SIN
Posted By: Amanda Syme

Re: GST on property sales? - 12/19/05 03:55 PM

I often miss the days when there were only 300 people here, all happy and smiling, going about their business in bare feet. Nobody on the streets from the hours of noon to 4 pm - everybody to bed by 8 or 9 except for the occassionally celebration which the whole village attended. No tv, no phones, no jealousy or keeping up with the Jones'. No vehicles, few outboard motors. Folks cooking on coconut husk fires, and fish drying everywhere. The movie theatre was the highlight of the weekends for the kids, yes, we watched Bruce Lee!

Those were the good old days.

But times do change, and we can begrudge the changes or do our best to control the changes and adapt with them. There is no going back.

I suppose if the taxes become prohibitive foreign investors will stop visiting the Caribbean in the winter time :rolleyes:

I don't want to pay higher taxes, or levy them onto my clients. I am lobbying the tax dept., not just sitting here whining about it on the board. The world of politics and government are not ideal, hopefully a tax system that appears to be fair will prevail. Let's all hope so.
Posted By: shuffles

Re: GST on property sales? - 12/19/05 04:32 PM

I totally agree about the "rich" vs. "poor" perspective, and I too miss the days when I first vacationed here several years ago....but my concern is that now there is a generation of locals who have become accustomed to the "affluence" if you will of their particular lifestyle. And while I cringe when "progress" happens, and would be content without a bridge, or taxis or hourly flights from the mainland, I wonder about that new generation of San Pedranos, who have 'basked in the light of tourism', and who may not want to step backward. Besides the pain in **s for business owners, I do wonder about the effect on the locals........
Posted By: Corona Steve

Re: GST on property sales? - 12/19/05 05:08 PM

Taxes, Roads North, Bridge, and 4 Story building permits, increased Development.
Have read a lot on this post, concerning these issues, and find it very unprofessional, and would like to hear from those who have the real answers, and not rumors, as this hurts both tourist, and those who want to bring much needed money to this country. I try and get my answers from those pros's who know what is going on, and are connected, to the truth.
Quite scaring people, into staying away.
Posted By: SP Daily

Re: GST on property sales? - 12/19/05 05:32 PM

You're looking for THE TRUTH on a message board?!!
Ha!
Posted By: shuffles

Re: GST on property sales? - 12/19/05 05:34 PM

Mr. Corona
Guess you will have to enlighten all of us who live here on the island about things....since you are so well connected (to all the "pro's" sic), and living in the US. No one is trying to scare anyone.....we are simply trying to make sense of our every day lives. I realize you are not affected, if you are not living and conducting business here. I would suggest you "quite" (sic) scolding folks trying to make sense of things here.
Posted By: WhiteWater

Re: GST on property sales? - 12/19/05 05:48 PM

shuffles, did you find the answer to the question of existing purchase agreements that will close after (if?) the GST is active? That's an interesting situation.
Posted By: Corona Steve

Re: GST on property sales? - 12/19/05 05:50 PM

shuffles
If you read past post,s it has already scared some into investing.
Read past post to see.

Jesse, I think you are right on.
Posted By: Short

Re: GST on property sales? - 12/19/05 06:09 PM

Corona Steve, it's scaring us here here in Belize too!
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