On February 16, 2016, the BC Government announced some significant changes to the property transfer taxes collected when real property in BC is transferred. This overview provides you with key information on some of the new rules.
3% tax rate
A new third tier tax rate on transfers of all real estate was imposed as of February 17, 2016, at a rate of 3% of fair market value over $2 million. The property transfer tax rates are now:
- 1% on the first $200,000;
- 2% on the portion of the fair market value greater than $200,000 up to and including $2 million; and
- 3% on the portion of the fair market value greater than $2 million.
Generally, fair market value is the same as the purchase price. With these new rates in place, a transferee will pay an extra $10,000 in taxes on each million above $2 million.
The Newly Built Home Exemption
The BC Government also introduced an exemption for transfers of newly built homes (the “Newly Built Home Exemption”) with values of under $800,000, including condominiums, townhouses and vacant land. There is a complete exemption for fair market value of up to $750,000 with a relative reduction from $750,000 to $800,000 of fair market value. In order to qualify for the full exemption, both the purchaserand the property must qualify:
- the purchaser must:
- be a Canadian citizen or permanent resident;
- move into the new home within 92 days of the date the property is registered in the purchaser’s name (the “Registration Date”); and
- continue to live in the new home as the purchaser’s principal residence for first year following the Registration Date; and
- the property must:
- be a newly built home (see definition below)
- have a fair market value of $750,000 or less; and
- be 0.5 hectares (1.24 acres) or smaller.
A newly built home includes:
- a new house constructed on vacant land;
- a new apartment or townhouse in a newly constructed condominium building;
- a manufactured home that is affixed on vacant land;
- a used house that is removed from another land and affixed on vacant land;
- a subdivision of an existing building to create new townhouses or apartments that have not been occupied since the subdivision; and
- a conversion of a non-residential building into a residential building.
A partial exemption is available if the purchaser meets the above criteria, but the property:
- has a fair market value greater than $750,000 and less than $800,000;
- is larger than 0.5 hectares; or
- has another building which is not the purchaser’s principal residence.
A purchaser who qualified for the Newly Built Home Exemption but did not apply for the exemption on the Registration Date may apply for a refund of the taxes paid by submitting an application within 18 months from the Registration Date.
For vacant land, a purchaser who completes the construction of and moves into a new home on vacant land within one year from the Registration Date can apply for a refund of property transfer tax that was paid on the Registration Date provided all the other requirements are satisfied (meaning that the value of the land and the value of the improvements cannot exceed $800,000). All refund applications under this category must be submitted after one year from the Registration Date and within 18 months from the Registration Date.
A purchaser who does not qualify for the Newly Built Home Exemption on the Registration Date because the purchaser is a foreign national on the Registration Date but becomes a Canadian citizen or permanent within a year of the Registration Date may apply for a refund of the property transfer tax that was paid on the Registration Date. All refund applications under this category must be submitted after the purchaser becomes a Canadian citizen or permanent resident and within 18 months from the Registration Date.
There is no limit to the number of times a purchaser can apply to receive the Newly Built Home Exemption provided all the requirements are met for each subsequent purchase of a newly built home.
As this exemption applies only to newly built homes, a purchaser of a used home can only apply for the First Time Home Buyers’ exemption, if applicable, for any property transfer tax relief.
As with all property transfer tax exemptions, the transferee files the tax return and claims the applicable exemption. The transferee takes the risk of any taxes payable for a false declaration as the transferor is not involved in the transferee’s declaration.
Existing First Time Home Buyers’ Program
The existing First-Time Home Buyers’ Program (FTHB) remains relatively unchanged except that purchasers cannot claim both the FTHB and the Newly Built Home Exemption for the same purchase transaction. For the FTHB:
- the purchaser must have lived in BC for 12 consecutive months prior to the date the home is transferred or filed at least two income tax returns as a BC resident in the last six years;
- the purchaser must not have ever owned a principal residence anywhere in the world;
- the purchaser must not have ever received a FTHB exemption or refund;
- either new or used homes that have a fair market value of $475,000 or less are eligible for the full FTHB exemption; and
- either new or used homes that have a fair market value greater than $475,000 but less than $500,000 are eligible for a partial FTHB exemption.
There will be a transition period to allow purchasers who are eligible to claim either the FTHB or Newly Built Home Exemption to cancel their application for the FTHB and claim the Newly Built Home Exemption. Once a purchaser claims the FTHB or Newly Built Home Exemption, he or she cannot claim the FTHB in the future.
Disclosure of citizenship and beneficial owner
Starting in the spring/summer of 2016 (date to be confirmed), the BC Government will require all individuals, corporations and bare trustees who are transferees of real property in BC to disclose their citizenship and identity of beneficiaries.
For a corporate transferee, it must disclose:
- the total number of directors;
- the number of directors who are Canadian citizens or permanent residents; and
- the names, addresses and country of citizenship for all directors who are foreign nationals.
For a bare trustee or nominee (whether it is an individual or corporation), it must also disclose the following for the settlor and beneficiary of the trust:
- if it is an individual:
- the names and addresses of the settlor and beneficiary; and
- if the individual is a Canadian citizen or permanent resident, and country of citizenship for any foreign nationals; or
- if it is a corporation:
- the names and addresses of all directors of the settlor and beneficiary; and
- if the directors are Canadian citizens or permanent residents, and the country of citizenship for all directors who are foreign nationals.
This disclosure of citizenship and beneficial ownership is only required for taxable transactions at the time a transfer is registered at the land title office. At this time, there is no continuing obligation to disclose the identity of the beneficial owners for transfers that are not registered.