The Additional Property Transfer Tax
As mentioned in my last blog in March, one of two new real estate taxes announced by the B.C. government in its 2018 budget this past February is the Additional Property Transfer Tax. In this blog I will provide an outline of the measures covered by this tax and highlight some of the main points that could affect current B.C. property owners and prospective home buyers.
Prior to February 21, 2018, the property tax transfer rate was 15 % on properties in the Greater Vancouver Regional District. After February 21, the transfer tax increased from 15 % to 20 %, based on the fair market value at the time of registration for property transfers in the following areas in the province of British Columbia:
- Greater Vancouver Regional District
- Capital Regional District
- Fraser Valley Regional District
- Regional District of Central Okanagan
- Regional District of Nanaimo
Two Important Exceptions
Excluding the Greater Vancouver Regional District, the remaining four regions noted above have two instances where you don’t have to pay the additional transfer tax on property transfers after February 21: First, you don’t have to pay if you register before, or on, May 18, 2018, as long as the property transfer is subject to a written agreement dated on or before February 20, 2018; and second, if the transfer is subject to a court order dated before February 20, 2018, or several other specific legal conditions on property transfers related to divorces, separations, or estates of deceased persons. I advise you to get advice from your lawyer if any of these situations applies to you.
As a general guide, the changes introduced on the property tax transfer took effect February 21, 2018. If you purchase a property that is registered at the provincial Land Title Office, you will need to pay certain transaction costs which are taxable. Without going into the details of the various legally required transactions – which your Realtor can explain to you – I want to point out to you that you can qualify for a reduced tax if you are: a) purchasing your first home; or b) purchasing a newly built home.
The tax is calculated on the fair market value at the time of property registration. Note that properties on the Tsawwassen First Nation lands are exempt from the additional property transfer tax. There are also two other exemptions which I would advise you get legal advice if you not sure they apply to you. The first is any exemption that applied to you for the previous property tax transfer also exempts you from the additional transfer tax, except in the following situations: i) a transfer resulting from an amalgamation; ii) a transfer to a surviving tenant; iii) a transfer where the transferee is or becomes a trustee in relation to the property, even if the trust does not change; and second, if you are confirmed B.C. Provincial Nominee and certain criteria are met for foreign nationals under the B.C. Provincial Nominee Program.
Foreign Nationals and Foreign Entities
If you are a confirmed under the B.C. Provincial Nominee Program when the property transfer is registered with the Land Title Office; ii) the property is to be used as your principal residence; iii) the property transfer is made to an individual. Note that the additional property transfer tax does NOT apply to registration of mutual fund trusts, real estate investment trusts or specified flow-through trusts. You should also note that if you were confirmed as a B.C. Provincial Nominee between August 2, 2016 and March 17, 2017, you might be eligible for a refund of the additional transfer tax if you paid it.
If you happen to be a foreign national, a foreign corporation, or a taxable trustee, there is also an additional transfer tax on residential properties in certain areas of British Columbia, as listed above.
This summary of the new Additional Property Tax is based on information provided by the Government of British Columbia. I have summarized what I think are the major points of interests for my clients; however, like any tax measures, there are always situations that may require more in depth information. I would recommend that if you think you may be in such a situation that you talk to a knowledgeable tax lawyer about your specific situation. I hope the above summary has informed you adequately to understand if the new transfer tax may apply to you, You may find additional information on the new transfer tax at: B.C. Provincial Budget Tax Changes.
I will watch for any changes in these tax rules and report what I see in the blog space. Please feel free to ask for any advice that I might be able to provide. I’m always happy to help in any way I can.
Thanks for reading!
Sibo Zhang, REALTOR®