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PROPERTY TRANSFER TAX

When you purchase or gain an interest in property that is registered at the Land Title Office, you’re responsible for paying property transfer tax.

Taxable transactions include:

  • transfer of fee simple
  • right to purchase or agreement for sale
  • lease or lease modification agreements
  • life estate
  • foreclosure
  • Crown grant
  • escheatforfeiture or quit claim
  • transfer as a result of corporate reorganization

You pay the tax based on the fair market value of the property at the date of registration, unless you qualify for an exemption.

Property transfer tax should not be confused with annual property taxes. Annual property taxes are paid yearly for each property you own or have a registered interest in to fund services in your area.

 The First Time Home Buyers’ Program

The First Time Home Buyers’ Program reduces or eliminates the amount of property transfer tax you pay when you purchase your first home. If you qualify for the program, you may be eligible for either a full or partial exemption from the tax.

If one or more of the purchasers don’t qualify, only the percentage of interest that the first time home buyer(s) have in the property is eligible.

For example, if you qualify and purchase a property with a fair market value of $400,000 with a person that doesn’t qualify you would still qualify. If you owned a 60% interest in the property, 60% of the tax amount would be eligible for the exemption.

To qualify for a full exemption, at the time the property is registered you must:

  • be a Canadian citizen or permanent resident
  • have lived in B.C. for 12 consecutive months immediately before the date you register the property or filed at least 2 income tax returns as a B.C. resident in the last 6 years
  • have never owned an interest in a principal residence anywhere in the world at any time
  • have never received a first time home buyers’ exemption or refund

and the property must:

  • be located in B.C.
  • only be used as your principal residence
  • have a fair market value of:
    • $425,000 or less if registered on or before February 18, 2014, or
    • $475,000 or less if registered on or after February 19, 2014
  • be 0.5 hectares (1.24 acres) or smaller

You may qualify for a partial exemption from the tax if the property:

Find out the amount of your exemption if you qualify.

If you don’t qualify because you are not a Canadian citizen or permanent resident, but you become one within 12 months of when the property is registered, you may apply for a refund of the tax. To apply for a refund call (250) 387-0604.

Apply

To apply for the First Time Home Buyers’ Program you need to complete the First Time Home Buyers’ Property Transfer Tax Return when you or your legal professional register the property transfer.

After you have applied you must meet additional requirements during the first year you own the property to keep the tax exemption.

Penalty for False Declaration

All applications are reviewed. You will be charged a penalty equal to double the tax if you falsely declare that:

  • you have never owned an interest in a principal residence anywhere in the world at any time, or
  • you have never received a first time home buyers’ exemption or refund

First Year of Ownership

At the end of the first year you own the property you will receive a letter. The letter is to conditionally confirm that you meet the occupancy and property value requirements after you:

Existing Home

To keep the tax exemption you must have:

  • moved into your home within 92 days of the date the property was registered
  • continued to occupy the property as your principal residence for the remainder of the first year

You may keep part of the exemption if you moved out before the end of the first year.

If the owner passed away, or the property is transferred because of a separation agreement or a court order under the Family Law Act before the end of the first year, you still qualify to keep the tax exemption.

Built New Home

If you registered a vacant lot and built your own home, to keep the tax exemption:

  • the fair market value of the land when you registered the property plus the cost to build your home must be:
    • $450,000 or less if registered on or before February 18, 2014, or
    • $500,000 or less if registered on or after February 19, 2014
  • you must have built and moved into your home within 1 year of the date the property was registered
  • you must have continued to occupy the property as your principal residence for the remainder of the first year

You may keep part of the exemption if you moved out before the end of the first year.

If the owner passed away, or the property is transferred because of a separation agreement or a court order under the Family Law Act before the end of the first year, you still qualify to keep the tax exemption.

Understand Your Taxes

You are charged property transfer tax when you make changes to a property’s title, including:

  • acquiring a registered interest in the property
  • gaining an additional registered interest in the property
  • becoming the registered holder of a lease, life estate, or right to purchase for the property

The amount of tax you pay is based on the fair market value of the land and improvements (e.g. buildings) on the date of registration unless you purchase a pre-sold strata unit. The tax is charged at a rate of 1% for the first $200,000 and 2% for the portion of the fair market value that is greater than $200,000.

For example, if the fair market value of a property is $250,000, the tax paid is $3,000.

If you have registered a life estate for the property, you will be taxed based on your life expectancy. To calculate the taxable value of your property, multiply the property’s fair market value by the percentage corresponding to your life estate term.

Fair Market Value

Fair market value is the price that would be paid by a willing purchaser to a willing seller for a property (land and improvements) in the open market on the date of registration.

Open Market Transfers

A property transfer is considered to be in the open market when anyone likely to be interested in purchasing the property can make an offer. For example, the seller lists the property with a realtor or advertises it for sale.

The purchase price is considered the fair market value in most cases as long as you register the property within a few months of signing the sales contract. Otherwise, you will need to verify that the purchase price is fair market value if:

  • there was a significant change in value
  • the condition of the property changed
  • you didn’t purchase the property in the open market

Non-Open Market Transfers

When a property transfer doesn’t take place in the open market, fair market value may be determined using other means such as:

  • a recent independent appraisal, or
  • the property valuation provided by BC Assessment

Generally, the property valuation provided by BC Assessment reflects your property’s fair market value as of July 1 of the previous year. For example, the 2013 roll value reflects market conditions at July 1, 2012. This means that the assessed value may not reflect the current fair market value of your property.

The current property valuation provided by BC Assessment can’t be used in certain cases, such as when:

  • changes have been made to the property (e.g. rezoning) since the assessment
  • market conditions in the area of the property have changed since the assessment
  • the land is classified as farm land (class 9)
  • new or additional construction has been completed

For further information please visit the website

http://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/understand#calculate