What does this actually mean?
The Valuation List sets out the Annual Rental Values (“ARVs”) for properties in Bermuda and the 2015 Valuation List is the current list in force. As part of the provisions of the Land Valuation and Tax Act 1967, a new draft valuation list is to be prepared every five (5) years.
An island-wide revaluation is a review of the ARVs of all properties in Bermuda at a particular point in time and ARVs are the basis for determining the land tax that is payable by property owners.
The next draft valuation list was due to go on deposit on 31st December, 2020 and come into effect for land taxation purposes on 1st January, 2021, thereby replacing the current 2015 Valuation List. In the 2020 Draft Valuation List, ARVs were to be based on rental levels as at the antecedent valuation date of July 2019, seven (7) months prior to the COVID-19 pandemic.
However, as the pandemic continues to ravage economies worldwide, Bermuda has not been spared this economic tsunami and catastrophe, with unprecedented unemployment levels and depressed economic activity in all industry sectors.
Therefore, it would be far more beneficial economically to tie new ARVs under the next revaluation cycle scheduled for 2025 to post COVID-19 levels, where the impact of the economic circumstances are more clear and the economy will have a longer period to recover. A post-COVID-19 valuation date ensures that the next revaluation period reflects the impact that the pandemic has on property values. Considering the current volatility in the rental market and the existing uncertainty in the economy as a whole, postponing the Island wide revaluation is a sensible and sound decision.
Other countries globally are using this time to help reduce uncertainty to those affected by the impact of COVID-19 in the form of economic stimulus packages. Furthermore, conducting an Island wide revaluation during economic instability is not in keeping with rating principles and industry best practices.
Thus, the postponement of the preparation of the next draft valuation list means that the current 2015 Valuation List remains in force for another five (5) years until it is replaced by the 2025 Draft Valuation List.
Frequently Asked Questions
Was the Revaluation postponed because of declining rental levels and consequently a reduction in land tax?
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No, the main reason for the postponement is due to the COVID-19 pandemic as mentioned above and as detailed in the Ministerial Statement.
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Not all rental evidence collected for the 2020 Revaluation showed decreases in rental levels. While the majority of the evidence did show reductions in the commercial and large parts of the residential sectors, there were some small areas of the rental market that showed increases in passing rental levels.
Will Government simply increase the land tax rates to raise more revenue if ARVs are not changing?
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The Ministry of Finance have committed to not increasing the land tax rates for the January 2021 billing cycle.
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In the February 2020 Pre-budget Report, the Minister of Finance had previously committed to a revenue neutral Valuation List i.e. the new 2020 Draft Valuation List would raise the same $85.5 million in land tax. Thus, any decreases in ARVs would have resulted in higher land tax payments to offset the ARV decreases. With no changes to ARVs, $85.5 million in land tax revenue remains intact.
Can a taxpayer request a reassessment of their ARV if they believe it is incorrect?
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Where there have been physical alterations to a property, a taxpayer can contact the Department and request an inspection. The Land Valuation Department has received on average 1,000+ cases per year and currently, 1/5th of all requests for property inspections received by the Department in 2020 are made directly by taxpayers.
Can I get an ARV re-assessed if the rent I am currently charging is lower than my current ARV?
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ARVs are not decreased as a result of a tenant paying a lower rent than the assessed ARV. Inversely, ARVs are not increased when a tenant is paying a higher rent than the assessed ARV.
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If there have been physical alterations made to a property that the Land Valuation Department is unaware of and that are not currently reflected in the property’s ARV, then yes, the ARV can be re-assessed.
As the right to objecting to the new draft valuation list is effectively removed, how can a taxpayer object to their current ARV if they are unhappy with it?
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Whenever the current 2015 Valuation List is amended (following a physical alteration or a material change), a taxpayer has the right to lodge an objection to the proposed ARV within the statutory objection period. This right remains in place and is available to all taxpayers.
So what dates are the current ARVs appearing in the Valuation List set at?
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The ARVs appearing in the Valuation List are set at the antecedent valuation date of 1st July 2014.
What are the main benefits of the postponement of the preparation of the next draft valuation list?
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Businesses and homeowners have certainty in land tax liabilities as ARVs will not be changing, thereby maintaining consistency and reliability in property taxation.
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Government has certainty of $85.5 million of revenue raised from land tax, Government’s third largest direct revenue stream.
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Various ARV thresholds do not need to be adjusted, providing stability to all affected by pensioner exemptions, rent control and selling properties to restricted persons.
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Government can continue to focus on supporting businesses and homeowners impacted by the COVID-19 crisis in the form of economic stimulus and recovery packages.
Will the postponement affect the freehold value of my property?
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The postponement of the 2020 Valuation List will have no effect whatsoever on the open market value of properties on the Island as there is no correlation between the ARV of a property and its open market value.
Will the postponement affect what rent I can charge for my property?
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Unless already subject to some form of existing rental restriction (e.g. Rent Control – The Rent Increases (Domestic Premises) Control Act 1978 which currently applies to a tenancy of any residential unit with an ARV of $22,800 or less), the postponement of the 2020 Valuation List will have no effect on the rental income or its potential rental income of a valuation unit. A property can be privately rented for whatever the market place is willing to pay, unless it is under the rent control threshold.
The Land Valuation & Tax Act 1967
Under the provisions of the above Act, a new Valuation List has to be prepared to take account of changes in rental levels since the current 2015 Valuation List was last compiled. It is therefore necessary to obtain information about your property in order to prepare the new 2020 Valuation List. All information collected by the Department is confidential and will solely be used for the purposes of the revaluation and not shared with any other entity.
Survey forms are due to be mailed in October 2019 from the Department asking various questions about your property.
Below are step by step guides which give further information about each question to help you complete the forms correctly.
Residential Properties Guidance Notes |
Condominium Properties Guidance Notes |
Commercial Properties Guidance Notes |
Tourist Properties Guidance Notes |
Survey Forms Not Returned
Here is a
of properties in alphabetical order that the Department has not received a 2020 REVALUATION form as of 20th March 2020.
Please download the appropriate survey form above, complete and submit back to the Department as quickly as possible.
Forms can be emailed to landval@gov.bm or contact 297-7964 for further information.
Offences
Please note that in accordance with Section 7 (3) and Section 7 (5) of the Land Valuation and Tax Act 1967, it is an offence to:
- Not return the form within the 21 days of service. Failure to do so could result in a fine of $1,000.
- Make any false statements on the form. This could result in imprisonment for 3 months or a fine of $5,000, or both.
Any person who fails to return the form within the prescribed period or knowingly withholds information shall not be able to produce that information in any objection to the Draft or Confirmed Valuation List(s) per Section 7 (2)(a) of the Land Valuation and Tax Act 1967.
Other Useful Links
Island Wide Revaluations
Revaluation of properties – maintaining the valuation list and Methodology of land revaluations