DO YOU RENT YOUR HOUSE/APARTMENT ON AIRBNB? IT WILL SOON BE TAXED BY VI GOVERNMENT

Did anyone think it was going to be tax free income forever?

10 years ago when I decided to rent my 1 bedroom apartment short-term, instead of long-term, I went to DLCA to see if I was required to be licensed to do so. I was told that because it was the only rental on the property and I lived on the property, full-time, I didn't require a license as it was more or less the same as renting long-term. Obviously, that's changed. I always paid taxes on any income derived and gross receipts, if needed.

I switched back to long-term a few years ago after I hurt my back.

I'm beginning to wonder if/when they're going to decide to charge additional fees on long term rentals since the VI is so broke.

I don't mind paying what's owed but it would be nice to get something in return like better roads, a cleaner island, more consistent electricity, not having to give your garage a scenic tour of the island before you can dispose of it, better hospitals, schools, less crime, etc.

They are in the process of amending Bill #31-0234 as mentioned in a separate post here on the forum.

They've just found a convenient way to enforce/collect the existing hotel occupancy tax. It's not a new tax nor is it an income tax. Funny thing is they mention encouraging owners renting out five or more rooms in a home to get a license when one is required for even a single room or unit. So they are essentially recognizing they are less concerned with smaller homes/units getting a license.

This may not be such a bad scary thing. The tax is supposed to be on top of the gross room rate so in a way this could work out reasonably for all. The renters pay the tax they should be paying anyway, owners still collect the same rates, AirBNB remits the collected tax to the BIR, owners don't have to deal with filling the monthly paperwork to the BIR, or getting a license if they are not going to enforce that either.

Now the question is in the haste to get this implemented are they going to actually change the law to not require the "hotel" to file the monthly paperwork if AirBnB is automatically remitting the tax so that owners are technically legal if they don't file? Or more paperwork for example will AirBNB send a new tax form like a W2 documenting what has already been remitted to BIR to the owner's to file with their existing monthly form in place of remitting the already paid tax?

Seems the villa owner's renting 5 or more rooms are the one's that will be paying more in property tax and getting impacted the most by this.

Actually, one of the changes that they are considering in amending Bill
#31-0234 is changing the assessment of property tax from residential rate to commercial rate for anyone renting short term even if there is only a single rental on property.

so what's the difference between residential property tax rates and commercial property tax rates?

This might not be up to date especially with changes to come.

Property Tax
The US Virgin Islands currently imposes a real property tax at 1.25% of the property’s assessed value. The property’s assessed value is 60% of its actual value or fair market value. Thus, the effective tax rate is 0.0075% of the property’s fair market value.

(Note - there have been issues on a number of occasions where a property has sold for a lesser price than asking price and the tax assessors office has seen fit to charge a higher market value.
This becomes problematic because sellers and buyers, especially if paying the whole or portion of this tax get completely surprised by it and the entire deal can collapse.

For instance, you're counting on paying a certain amount at closing based on selling price and your buyer has committed to paying half then Tax Assessors Office says, Nope! We assessed your property for a Fair market value $150,000K over your sales price. This bumps up the stamp tax, tremendously, in some instances.)

However, a new rate structure is being proposed wherein applicable tax rates vary depending on the classification of the property:

PROPOSED PROPERTY TAX
PROPERTY CLASSIFICATION
TAX RATE
Residential property
0.0036%
Vacant land
0.0046%
Commercial property
0.0065%
Timeshare property
0.0110%

I just received the following. As I'm presently in FL, I was unable to attend to my utmost regret as I had many questions regarding the proposed legislation. Hoping to get an update soon.

Dear STBOR Members…

On Friday morning, Attorney David Bornn and Steve Jamron of Sandpiper Realty gave a very sobering and ominous presentation to our membership about the way transactions are handled in the Cadastral Office vs. the way they SHOULD be handled under VI Code, as well as elaborating on the government’s plan to instill authority in that office, which, by VI Code, is the exclusive authority of the court.

In other words, we do not want people in clerical positions to be practicing law. The impending legislation would enable them to do just that.

CALL TO ACTION:
We are asking all of our constituents to protect buyers and sellers by joining in a show of support against proposed legislation that gives Cadastral legal powers that should remain with the courts.

TUESDAY – 10 am.
(TIME TO BE CONFIMED MONDAY)

Because the legislature’s schedule can change last minute, we ask that you be prepared to join our numbers at this time on Tuesday, but please CHECK YOUR EMAIL MONDAY FOR CONFIRMATION – TO THE BEST OF OUR ABILITY – ON THE EXACT TIME THIS LEGISLATION WILL BE ON THE AGENDA. (Our hope is to send you the latest version of this legislation prior to the Tuesday session.)

If you wish to practice real estate in the Virgin Islands in a manner that is protected by statute and in line with standardized practices around the nation, then please SHOW UP!

Steve Jamron and Attorney David Bornn were the presenters, both of whom have spent years working on the Public Surveyor and/or Property Tax issues.

STBOR is St. Thomas Board of Realtors.

Nothin for nothin, but it's amazing how the people that cried the most about the evils of HOVENSA's operation, are now crying about how the government has to make up for the massive tax losses.

This is what happens when you bite the hand that feeds you.

Let's face it. Oil prices and production was dropping, there were environmental and ground water contamination concerns.
Yeah, the money was good but one cannot be dependent on a single source of income and then allow it continue to screw our environment
and not plan for tomorrow. Oh! Woe is me!

Don't talk about the hand that feeds you, if you're the one biting it.
Plus, you don't continue spending, willy nilly, as continues with this administration and group of senators who greedily took their $150K payoffs, shut TFU and continues to spend and not rein in Mapp.

WTF happened to "transparency?"
I'll tell you.
Mapp's family members on boards and key positions, rampant nepotism and indulgences, what is it now - 4 or 5 Attorney General's later he's went thru in the first year? No Freedom of Information Act requests responded to by either the AG or legislature, no actions by the legislature to curb excessive spending.

My point is to quit bitchin' & moanin' about all the new taxes. The government was built around that massive tax income as well as many other businesses, charities, and non-profits.
I'm certainly not defending all the actions of this government, but that massive loss in revenue (an estimated 800 million between Hovensa and its subsidaries) has to be at least partially made up, and they have no choice but to follow the money.

See above, singlefin.
If it's fair, it's fine but...

It's not about what's "fair".
It's simple math.

What's fair is not having "people in clerical positions to be practicing law. The impending legislation would enable them to do just that."

Please educate me on the simple math that has a body of government, for instance, the VI Legislature, alone, spending $12 MILLION to provide "$ervice$ for our population?

Bill No. 31-0441
Office of Public Surveyor

Background
When a buyer is seeking a mortgage to purchase real estate, a licensed surveyor is hired to ascertain the boundary lines.

If the surveyor, whose job it is to guarantee that the property is what the Seller claims it is, discovers that the boundary lines are not as they appear in the public record, then the title company will not issue a title policy. This also means that if the survey shows that someone other than the seller-of-record owns any portion of the property, the bank won’t issue the loan until the property dispute is resolved.

Under VI Code, if the parties involved in a property dispute cannot reconcile, the court must decide.

Enter the Public Surveyor
If the proposed legislation is enacted as is, the VI will now be giving the Public Surveyor the power to adjust or challenge boundary lines. In other words, it will empower a government clerk to challenge the conclusions of an experienced and licensed, bonded and insured surveyor – challenges which the Code says are the sole jurisdiction of the VI Courts.

Tremors Throughout the Industry
The decision-making power this legislation gives to a government clerk will mean that title companies will be unwilling to insure titles on properties affected by the Public Surveyor’s changes and lenders will not issue mortgages. The net result? Sellers can’t sell and buyers can’t buy.

Fiscal Consequences to the Government
In 2016, $274-million worth of real estate changed hands publically in more than 750 transactions. That doesn’t count millions of dollars in private transactions. Collectively each year, those sales pour millions of dollars into government coffers through Stamp Taxes, recording fees and other charges that go hand in hand with real estate transactions.

A Blow to Merchants and the Service Industry
The effects of cancelled real estate transactions go far beyond simply the government’s revenues. They are crucial to a variety of merchants and vendors. Home buyers purchase furniture, appliances and housewares. Often want to renovate so they hire builders, plumbers, electricians, landscapers, house keepers and cleaning people. They buy internet and cable services; and if they come from off-island, they are probably purchasing a car, paying taxes to the VI government, opening WAPA accounts, patronizing our stores and services. This legislation doesn’t just jeopardize the real estate process in the Virgin Islands, it will serve to unravel the local economy.

The Death of Timely Transactions
In addition to the grave implications of investing such powers in the Public Surveyor, this bill adds a layer of bureaucracy to the purchase process which, by its nature, is time consuming and cumbersome. Making the buying and selling of property subject to the unnecessary additional protocols codified in this bill will be costly and detrimental to buyers and sellers.

For instance: “Attesting” a deed should mean that a clerk checks the attorney’s property description against the map of record. Period. But local attorneys will tell you that, time and again in the VI, a clerk renders objections to deeds that can vary from challenges to spellings all the way to challenging legal issues which clearly are not the province of the clerk. This bill solidifies those “clerical” powers.

The objections often raised by the clerks serve to delay the attestation process and cause experienced real estate attorneys to add hours of time to what should be a simple process. That in turn costs buyers and sellers hundreds of dollars more as the attorneys must work through these irrelevant and unnecessary steps in the filing process.

What's a Public Surveyor? Is this supposed to be a new position? A land surveyor is supposed to be licensed professional, earning a license requires years of experience (after and graduating from an accredited college with a surveying or similar degree) and passing a lengthy written test.

Older property descriptions describe the boundaries in terms of line endpoints, distances and bearings written in the deed while newer descriptions refer to a plat separately recorded in the public archives. They want to allow a clerk to re-write property descriptions? What are they going to do for plat plans, mark- them up in crayon and re-file them?

In 2016, $274-million worth of real estate changed hands publically in more than 750 transactions. That doesn’t count millions of dollars in private transactions.

How can there be private transactions not publicly recorded in a deed with the required transfer tax paid?

Private transactions are recorded.
They're usually between buyer and seller, directly.
They do pay stamp tax.

In the past, one paid the stamp tax according to the sales price so one knew, in advance, what was going to be owed for the stamp tax based
on that price.

However, in the last couple of years, some transactions have been charged
over and above the sales price at what the tax assessors office deems "fair market value" and this has been considerably higher than what a property sold for and is worth. There doesn't seem to be any consistency or formula as to how they arrive at their valuation which presents the problem.

For example, you've sold your property for $350,000, and you expect to pay stamp tax on that amount, only to discover your "fair market value" has been assessed at $550,000 which you're now on the hook for.
If you negotiated with your buyer to split the stamp tax payment, it's a rude awakening and can kill the deal if your buyer either doesn't have the means nor inclination to pay. Plus you're now spending thousands more dollars to sell than anticipated.

The other thing tho is if they deem fmv to be below the sales price, you pay the higher amount, regardless. It's screwed up. People like to know and deserve to know what these costs are upfront not at the closing table.

I have a friend that has an acre of undeveloped land in West Caret Bay. Her property tax bill assesses the value at a much higher rate than what she could ever sell the land for. I had a discussion with an assessor awhile back and I asked if they ever use real estate comps to evaluate prices. Apparently they have their own unique system that is used which doesn't seem to take in actual sales prices of comparable properties that have sold. It's a mess, IMO.

You've got to be exhusted Alana, trying to save the world everyday, one text at a time.

And what exactly is your problem Singlefin?

Alana is providing us all with a wealth of information. Most of us are homeowners and will most likely trade our properties sooner or later. Good to know from the professional how things are done w tax assessment. This is valuable info.

Back off Buddy. :$)

The other thing tho is if they deem fmv to be below the sales price, you pay the higher amount, regardless.

Yes, the stamp tax is based on the higher of the current assessment or the sales price. There should be no surprise in that, that's the published rules I recall. And the assessment is readily available so there should be no surprise at settlement what the stamp tax is going to be.

However by definition, fair market value is normally the price a willing buyer has paid a willing seller for the property. There is an appeals process for the VI tax assessments, Title 33, Section 2451 of the Virgin Islands Code. It won't help with the stamp tax at the time of purchase unless the seller has gone through the process prior to sale. If a buyer pays much less than the assessment they should be able to file an appeal based on the price paid immediately after the sale and get the assessment changed for the next property tax bill. Does that not work? Do they argue a different higher amount for FMV than what was actually paid in a recent sale?

My apologies SSTsailor.
I guess I just can't handle the level of constant negativity here anymore.

With all thats been said here, did anyone honestly believe taxes and fees weren't going up after the close of Hovensa?

Honestly I don't think the people would be as pissed about ANY taxes if the govornor and senators were living within the islands means. Literally spouting off about how broke "we" are and then PARKING the $600k in vehicles at the Ag fair (that were purchased instead of an ambulance... well that's a freaking slap in the face. The ENTIRE point is - sure we will help and pay more taxes BUT you bet your ass that they need to contribute! This means not staying at the Ritz, not hiring unqualified family, cutting your salary to a APPROPRIATE amount based on population, not buying 10k in sheets, not jetting off to the states every week for silly things and not paying your "entourage" to go with. These are just the things we know about... can you imagine what else? Forgive me but what's and where is the monthly/quartly? break down for gov appropriations? Isn't that supposed to be released to the public?

Personally I'll do whatever it takes to help these amazing rocks. If that's more taxes, ok fine but it's a real hard pill to swallow when mapp is out there just blowing money like crazy.

The VI offers another form of "welfare" for local citizens through government employment - lots of low salary jobs with limited responsibility but everybody works. It's part of the culture and a huge contributor to bracing up the economy.

Efficiency and austerity to reduce the overall budget can't really be accomplished without layoffs - most of the government's money is spent on salaries. However, layoffs won't happen. There is limited employment opportunities outside of the government and layoffs would further stress the limits of social services. Twenty-six percent of islanders are part of the VI government's Cigna health plan .... think about what layoffs could do to the already fragile health care system without a third party payer.

So raising taxes and fees is the only viable means of keeping the VI government and economy afloat. It's a far better strategy than austerity as long as tax changes are equitably applied.

Even with increases or reclassifications, property taxes will remain low in comparison to most places where you'd want to live on the mainland. But fairness and consistency are key to making this work and it doesn't help when the proposed system seems dubious.

Sin taxes are easy to get in place and are a way of squeezing funds from individuals who work in the VI cash economy. Legalizing pot would accomplish this as well.

(tu)(tu)(tu)(tu)(tu)(tu)(tu)(tu)(tu)(tu)(tu)(tu)(tu)(tu)(tu)
That is EXACTLY the point!

Honestly I don't think the people would be as pissed about ANY taxes of the govornor and senators were living above the islands means. Literally spouting off about how broke "we" are and then PARKING the $600k in vehicles at the Ag fair (that were purchased instead of an ambulance... well that's a freaking slap in the face. The ENTIRE point is - sure we will help and pay more taxes BUT you bet your ass that they need to contribute! This means not staying at the Ritz, not hiring unqualified family, cutting your salary to a APPROPRIATE amount based on population, not buying 10k in sheets, not jetting off to the states every week for silly things and not paying your "entourage" to go with. These are just the things we know about... can you imagine what else? Forgive me but what's and where is the monthly/quartly? break down for gov appropriations? Isn't that supposed to be released to the public?

Personally I'll do whatever it takes to help these amazing rocks. If that's more taxes, ok fine but it's a real hard pill to swallow when mapp is out there just blowing money like crazy.