As the chapter closes on the 2024 fiscal year, a call is being made to revise the stamp-duty tax tiers, among other considerations to help address real estate and construction industry costs.
According to the CEO of real estate agency Terra Caribbean, Jean Paul de Meillac, addressing the current stamp duty structure could aid in providing low-cost housing.
Stamp duty is a tax applied to certain transactions that require legal documents such as deeds of conveyance, deeds of gift, deeds of mortgage, release of mortgage loan, release of life insurance policies, transfer of shares, deeds of lease, deed polls, bonds, and any other deeds that require “stamping” which means users must pay duty.
Stamp duty tax is paid to the Inland Revenue Division when buying real estate or a home, seeking a mortgage, or conducting other financial transactions.
“It’s a tier system where the stamp-duty rates increase and get up to 7.5 per cent on residential property, pretty early in the price point. You know we’ve had inflation. Property prices have increased significantly with this methodology. But it hasn’t been adjusted to reflect where the prices are today,” said de Meillac in a phone interview with the Business Guardian.
“The stamp duty now is when you buy a property and you go to register the deed, you pay a one-time fee to the Government based on the value of the property, and the scale is based on antiquated fees, antiquated prices. The prices have increased now, so you almost always end up paying 7.5 per cent because the kind of ease up the lower tier taxes are much below what is available,” said the Terra Caribbean CEO.
The current tier rates for Stamp Duty for residential properties with values that exceed $850,000:
• For every dollar of the first $400,000 in excess of $850,000 – 3%
• For every dollar of the next $500,000 – 5%
• For every dollar thereafter – 7.5%
De Meillac explained, “Up to $850,000 you pay no stamp duty. But between $850,000 and $1.2 million you can’t get a house or an apartment and between $850,000 and $1.25 million, you pay a 3 per cent stamp duty. So to me, that band should start a little higher, and maybe that band should be a little wider. Then from $1.25 million it goes to $1.75 million at 5 per cent and then very quickly it gets to 7.5 per cent (from $1.75m upward).”
The Terra Caribbean CEO noted that this would place T&T above the stamp duty rates in other Caricom states such as Guyana, Jamaica, and Barbados, where stamp duty rates hover between 2 per cent and 3 per cent.
To further support the call to adjust the stamp-duty tiers, he pointed to the exemption currently applied to first-time home owners.
He said, “The government, right now, they offer no stamp duty, up to $2 million for first-time homeowners, which I commend greatly. I think that’s fantastic, and that has helped the first-time buyer to afford a home.”
He said that cost is not lost to the economy however as it often would lead to those buyers placing more into renovation of their property.
“The stamp duty they would have paid goes back into the loan or goes back into any improvements to the property. So while I’m saying, hey, reduce the tax you’re collecting, what happens is the money goes back into the construction industry, which is one of the main drivers in the economy. It enables the more vulnerable to afford housing, and it drives that tax back into the construction industry, which is one of the main drivers in the economy,” said de Meillac. “I know the government would not like to hear when we say cut taxes, but I do believe it’s in their interest too, because it will go back into the economy. Which we all want, a better, stronger economy.”
In 2021, the government created an online link on DevelopTT for stamp duty exemption applications. The exemption from stamp-duty can be sought when buying, selling or disposing of residential properties valued at TT $1.5 million or less.
While de Meillac did see this as an improvement in the process, he also called for the government to improve the application process across the board for various stages of the real estate development process
“It’s a step in the right direction, but it is sequential in some instances. You have to get one ministry before you get the next ministry then to get the next ministry, it can be cumbersome, and it can take time, which effectively is money, right? And that cost to a developer, is passed on to the buyer, so whatever the government can do to ease the process for a developer to produce a more affordable product is benefiting the consumer and the more vulnerable in society to afford houses, which is really what we all want to get to,” said de Meillac.
Ahead of the budget, the Terra Caribbean CEO also called for an extension of the tax exemption on the sale of property constructed for $1.5 million or less, which is currently set to expire by December 2025.
He said this would give developers greater confidence in approaching new projects. He stressed while it appeared that these adjustments would only favour developers, he said invariably these reduced costs are passed on to buyers. He said currently most developers were struggling to make cost-friendly homes due to increased costs of materials and have largely opted to try to repurpose older buildings.
“Just updating existing residential properties where the steel and the concrete are there already, they’re able to produce a product that’s more affordable. Again, that just kind of points back to the cost of construction being one of the main inhibitors. Construction is one of the main drivers of our economy. So there has to be a way to make it happen again. Most developers are kind of sitting on their hands, and because the numbers don’t make sense, when they work out the cost of building from scratch,” said de Meillac.
The Terra Caribbean CEO also felt an adjustment in the TT Mortgage Bank (TTMB) combined income ceiling could open the doors for lower-income buyers.
The current joint income ceiling for a 5 per cent mortgage at TTMB for joint salaries between $14,000 and $30,000.
