The Property Transfer Tax in BC
The Property Transfer Tax in British Columbia is a tax payable to the Provincial Government at the time of purchase by purchasers of real estate. The tax applies to all types of real estate, whether residential, commercial or industrial. It is exactly that, a tax to transfer title.
Here is how the property transfer tax in BC is calculated:
1% if the first $200,000 of the property’s fair market value plus 2% of the value portion between $200,000 – $2,000,000 plus 3% tax on the portion above $2,000,000
Let’s look at an example, the property transfer tax in BC on a purchase price of $2,100,000 is calculated as follows:
1% of $200,000 = $ 2,000 tax
+ 2% of $1,800,000 + 36,000 tax
+ 3% of $100,000 + 3,000 tax
= total tax payable tax calculator $ 41,000
*Note, the term “Fair Market Value” is best described as the price that would be paid for a property on the open market. This is usually the actual purchase price paid for the property.
If the transfer of property is taking place without the exchange of money, the fair market value must be the fair value of the property if it were sold on the open market. In some situations, the fair market value is determined by the most recent Government Assessment.
There are a number of exemptions available to purchasers so that the tax is not payable. The most common is the exemption for “First Time Home Buyers”.
As of February 19, 2014 to qualify for an exemption to the Property Transfer Tax as a First Time Home Buyer, the following criteria must be met:
- Purchaser must never have owned an interest in a principal residence anywhere in the world at any time;
- Purchaser must be a citizen of or a permanent resident of Canada and have resided in B.C. for at least one year prior to the purchase or have filed two income tax returns as a British Columbia resident within the last 6 years;
- To obtain full exemption, the purchase price must not exceed $475,000.00. A partial exemption is available for homes between $475,000.00 and $500,000.00 (see formula below)
- Purchaser must move into the property within ninety-two days after registration of the purchase of the property and reside in the property for at least one year;
- Pro rate exemption where property exceeds .5 hectares or a portion of the property is not residential (i.e. commercial lofts) – purchase price of entire property must not exceed the price limitations.
Property Transfer Tax should not be confused with Property Tax. The Property Transfer Tax is a one-time tax paid to the Provincial Government by purchasers of real estate. The Property Tax is the tax paid on an annual basis to the local City/Municipality.
Please remember that the policies surrounding the Property Transfer Tax Act may frequently change along with the exemptions for payment of this Tax
FEBRUARY 17, 2016 – CHANGES TO PROPERTY TRANSFER TAX FOR NEWLY BUILT HOMES
1. There are no changes to the first time home buyer exemption limits for newly built homes
2. All buyers (whether first time buyers or not) no longer pay property transfer tax on purchases of NEWLY BUILT homes up to $750,000 in value; note the buyer must be a Canadian citizen or a permanent resident; there is a partial exemption for homes between $750,000.00 and $800,000.00;
3. Property Transfer Tax has changed so that there is now a 3% tax on amounts over $2,000,000.00. The 3% tax is only paid on the amount over $2,000,000.00, not the full price.
If you have any questions or concerns regarding the changes to the property transfer tax for newly built homes, please contact our office.