Which taxes should we be aware of when purchasing or owning a property in BC?

Dated: July 1 2021

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Tax season is upon us and individual tax filing is officially open with CRA Netfile on Monday, February 22, 2021. While you are getting all your files in order, consider the following provincial (BC) and federal taxes that apply to buying and/or owning a home.

Property Transfer Tax (PTT)

When purchasing a home in BC, there are additional costs beyond the house price to consider; one of those costs might be the property transfer tax (PTT). The PTT is a transaction tax that is assessed when you purchase—or gain an interest in—property that is registered at the BC Land Title Office. Generally, the PTT is due at the completion and registration of the property transfer (the buyer is responsible for this). However, there are certain situations where you may qualify for an exemption from having to pay the PPT, which could reduce your overall tax costs significantly!

The most common PTT exemptions in BC are the following:

  • Newly Built Home Exemptions
  • First Time Home Buyer Exemptions
  • Family Exemptions
  • Vacant Land Refunds
  • Other Exemptions

Looking for a breakdown of how to calculate the PTT? Consider the following as the PTT applies in BC:

  • 1% of the fair market value up to and including $200,000
  • 2% of the fair market value greater than $200,000 and up to and including $2,000,000
  • 3% of the fair market value greater than $2,000,000
  • If the property has residential property worth over $3,000,000, a further 2% tax will be applied to the residential property value greater than $3,000,000.

As you can see, the PTT paid is based off of fair market value of the property—in most cases,  this is the purchase price of the property. However, if money is not exchanged—like in the case of an inheritance—then the fair market value can be established by an appraisal or the BC property assessment. Additionally, if you are a foreign national, foreign corporation, or taxable trustee then you will have to pay an extra property transfer tax of 20% of the fair market value of your portion of the property. There are resources available to get an estimate of your total property transfer tax payable.

Goods and Services Tax (GST)

The goods and services tax (GST) is a value-added tax put on most goods and services sold within Canada—right now, it’s at 5%. The GST is paid by consumers, but it is sent to Canada Revenue Agency by businesses to provide revenue for the government.

In real estate, GST is applied with the purchase of a new or presale home. Subsequently, you don’t have to pay GST on resale residential properties. If the property has been used solely for residential living purposes in the past, then the property is exempt from GST because the GST was already paid when the property was brand new or in the preconstruction phase.

If you are considering the purchase of a new or presale home that is subject to the 5% GST, you may be able to receive a rebate on the tax paid. However, the GST New Housing Rebate will depend on the purchase price and only applies to principal residences. The maximum rebate is 36% of the 5% GST paid during the sale and to qualify for this, the home must be $350,000 or less.

If the home is more $350,000, you may still qualify for a partial GST rebate. In order to qualify, the price of the new home would need to be more than $350,000 but less than $450,000. If the home is above $450,000 then you are required to pay the GST without the rebate.

Check out some resources to find out about GST in real estateand learn more about the GST rebate.

 

BC Speculation and Vacancy Tax

In BC, housing prices and rent have increased beyond reach for many people so the provincial government implemented the annual speculation and vacancy tax to help curb this housing crisis The main goals of the speculation and vacancy tax are:

  • Reduce the amount of empty, secondary homes being purchased recreationally so good housing is available for people who actually live and work in BC.
  • Implementing and assisting with affordable housing in BC’s growing cities

Many people have been opposed to the tax since it was added to the housing tax structure; people think it puts constraints on foreign and out of province buyers. However, by the second year of this tax initiative, the additional tax paid by foreign and out of province incomes has raised 88 million dollars towards building affordable housing for British Columbians. During implementation, it was discovered that 92% of this tax revenue was made by foreign owners, satellite families, Canadians that don’t primarily reside or work in BC, and other non-BC resident home owners.

The speculation and vacancy tax rate in BC for 2019 and subsequent years is:

  • 2% for foreign owners and satellite families.
  • 0.5% for Canadian citizens or permanent residents of Canada who are not members of a satellite family

If you have any questions on how purchasing your first home/owning a home is affected by property related taxes in BC — or any other questions about this blog—please contact me at 250-883-7858, info@jkvictoriarealestate.ca, or check out my IG @jkvictoriarealestate. I would be happy to help guide you to the appropriate resources for the 2020 tax season.

For more specific information on property related taxes in BC, go to the source websites at:

Edited by Alicia Mann

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Jemilla Khan

Jemilla is a residential REALTORĀ® in Victoria, BC. She serves the communities of Victoria, Oak Bay, Esquimalt, Victoria West, Saanich West, Saanich East, the Westshore and more. Previously to getting....

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