VERY strategically, the State has chosen now to push ahead with its agenda to implement the controversial property tax.
What’s so special about now? The Government of Trinidad and Tobago, by simple majority, has placed the country into a State of Emergency. The forms which the public must fill out under penalty of law (a fine of $5,000) is due by November 30, 2021.
Debate is raging over this tax. The “AXE THE TAX” movement is touted as a main reason the PNM administration lost the election in 2010 to the People’s Partnership coalition.
Today though, there can be no protests, akin to what happened the last time the PNM attempted to implement the tax. Under a State of Emergency, backed by an everyday 10 pm to 5 am curfew, protesting is severely limited. Most have taken to social media to get a voice. How effective it will be, time will tell.
Some persons in the debate are making the point that when Trinbagonians buy property in this country, they already pay a significant amount as a type of property tax. I can confirm as true, yes, citizens do pay a tax on the purchase of property called “Stamp Duty.”
The exception would be where the buyer applies for and obtains an exemption from the applicable tax and the property value is equal to or less than the exemption.
In the case of inherited land, (when someone dies and leaves you their property) we enjoy having no inheritance tax to pay. Today, inherited property (which is vested by way of a Deed called a Deed or Memorandum of Assent), attracts a fixed Stamp Duty tax of only $25.
This is not the case for property that is bought as opposed to inherited. Under the current Stamp Duty tax regime, the applicable Stamp Duty tax to be paid to the Board of Inland Revenue (BIR) depends on the value of your property and what category your property falls into (e.g., residential, commercial, agricultural). The purchase price of your property is not necessarily the value of the property. The BIR would assess the value of your property though its own valuation division (a free but terribly long process) or by acceptance from the buyer of a valuation report not older than six months from a land appraiser with RICS qualifications (this report is normally done at the buyer’s cost and can be a significant sum).
Property consists of land only, or land and building. The only type of property that a buyer can apply for an exemption from Stamp Duty right now is residential property. If the Seller of the property bought agricultural land and build a residential house on it, this does not convert the land use to residential land for Stamp Duty tax purposes. Normally documentation from the Town and Country Planning Division is required to prove that the land in question is zoned for use as residential land.
Residential land only purchases can be exempted up to the sum of $450,000.00. Residential land and building purchases can be exempted up to $850,000. First time homeowners (who don’t have property anywhere else) can get exempted up to $1.5 million dollars.
It is common knowledge that a standard 3-bedroom flat house on 1 lot of land (5,000 square feet) in Trinidad costs around $1.5 million dollars. Assuming that the property is zoned for residential use, the calculation for Stamp Duty (see https://etax.ird.gov.tt/ for the official Stamp Duty calculator) looks like this:
- If your application for exemption is successful, $850,000 of the purchase price attracts no tax, but tax is payable on balance of $650,000;
- 3% tax is applicable on every dollar of the next $400,000.00. This amounts to $12,000; and
- 5% tax is applicable for every dollar of the next $500,000.00. On a balance of $250,000 this amounts to an additional $12,500.
- Total Stamp Duty Tax paid to BIR before you can register your land is therefore $24,500.
In summary, under ordinary circumstances, you’d have paid just under $25,000 as a property acquisition tax for your three-bedroom flat. You would most likely pay an additional $0.5 – $1 million dollars in interest over 30 years to your mortgage lender. When this Property Tax is implemented, you will have to pay 3% of its annual rental value, less 10 %. On the assumption that your 3-bedroom flat carries a monthly rental value of $5,000, your annual property tax may be estimated around $1,600 per year.
For everyone but the Uber rich, this is another heavy burden for property owners, at a time when the cost of living is skyrocketing and survival as opposed to living is becoming the norm. It will be interesting to see how the public expresses itself, if at all, after the State of Emergency ends in November.
Be safe Trinidad and Tobago.
Copyright © 2021 Neela Ramsundar, LL.B (HONS), L.E.C is a Civil Litigation Attorney at Law & Certified Mediator.
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