FRIDAY, AUGUST 17: Land tax is a significant revenue earner for the Bermuda Government, which is based on a sliding scale tax rate as applied to a valuation unit’s Annual Rental Value (ARV).  The Land Valuation and Tax Act 1967 is the piece of legislation providing the operational framework for land tax, with the Land Tax Act 1967 providing the applicable tax rates.

The rates are contained in the Schedule to the Land Tax Act and are currently as follows:



Rate of



Tax %


 0 - 11,000



11,001 - 22,000



22,001 - 33,000



33,001 - 44,000



44,001 - 110,000



110,001 +


From the Table one can see that the higher the ARV, the higher the tax rate, which equates to higher tax.

The Land Valuation and Tax Act 1967 (the “Act”) provides for the director of Land Valuation to include valuation units on the Land Valuation list, and when on the list, such a unit is taxable.

The Act defines a “valuation unit” to mean “any land, building or part of a building occupied or capable of beneficial occupation as a separate unit.”

The accepted practice up until now, in relation to new buildings, was for a valuation unit to be deemed to come into being once an Occupancy Certificate was issued by the Department of Planning.

This practice was predicated on the assumption that the phrase “capable of beneficial occupation” in the definition of “valuation unit” meant capable of “legal” occupation, and in this regard, the existence of an Occupancy Certificate was taken as the test. Since the issuance of an Occupancy Certificate depends on the owner applying for one, there was the potential for tax avoidance abuse inasmuch as an application might purposely be delayed by the owner.

A recent ruling of the Bermuda Supreme Court has put paid to the previous practice.

The Chief Justice ruled in an appeal of a decision from the Land Valuation Tribunal by the director against Samuel Andrew Banks that a “valuation unit is “capable of beneficial occupation” for the purposes of … the Act … so as to trigger liability to taxation when it is physically ready for occupation, notwithstanding the fact that the owner has yet to apply for and be granted a Certificate of Completion and Use under the Building Code.”


This begs the question of how a determination that a unit is “physically ready for occupation” will be made, if not by the government department in the business of making such determinations (Planning Department), and may give rise to further litigation if such determinations are perceived to be made unfairly.

The case also focused on the ability of the director to combine multiple valuation units, as allowed under Section 5 of the Act.

This has ramifications for the amount of tax the Government can levy.

In the Banks’ case, which concerned a property at 17 Inglewood Drive, Paget having three valuation units and ARVs of $300,000 for the main house and $20,000 and $40,000 for other valuation units, had the director been successful in his bid to combine the units (such that the ARV would have been a cumulative $360,000), the net effect would have been an increase in the owner’s land tax bill by some $11,520 annually.

The Act makes a distinction in Section 5(1) between multi-unit complexes with a commercial nature–such as a hotel, cottage colony, guest house, lodging house, club or suite of offices–and those covered in Section 5(2), viz: multiple units in the same ownership but without such an ostensibly commercial element.

The Section 5(2) scenario would encompass a private home owner with say, an apartment or two on the side.

In Section 5(2) type cases, the Director cannot combine the units if the effect would be to increase the owner’s land tax bill.

In the recent Banks’ case, the director was unable to reduce the number of units owing to the fact that in previous appeals to the Land Valuation Tribunal, he had not made an issue of it when he had the chance; therefore, he was precluded from pursuing the matter in front of the Supreme Court on the basis of issue estoppel.

The Court did observe, however, that it was plainly within the ability of the director at the time a new multi-unit house was completed to determine the number of valuation units at that time and thus decide that there should be just one. However, once multiple valuation units were in existence in a single ownership residential situation, he was bound by Section 5(2).

Of course, Section 5(2) allows the director to combine a house and apartments together into one valuation unit if the resulting tax is equal to or less than before, and this can be achieved by appropriate adjustment of the ARV on the combined resulting single valuation unit. Any such action has to be done with “regard to the general purposes of [the] Act” and not, say, to rob the ability of the owner to make his apartment more rentable by virtue of it having an assessment number at which to register a car.

The Banks’ case is indicative of an understandable Government trend to try and maximize revenue in this current difficult economy.

In the meantime, developers can expect to receive closer scrutiny by the Land Valuation department of their unfinished buildings.

It remains to be seen what further refinements may be forthcoming regarding the test as to whether a valuation unit is “physically ready for occupation”.

Harry Kessaram is an associate at Conyers Dill and Pearman. He may be contacted at 278 7991 or via e-mail at