Land or property transfer taxes are enforced in different ways across Canada, either at the municipal level, provincial level, or both. In the case of British Columbia, it’s known as property transfer tax, and it’s important to understand if you want to purchase property in this province.
Property Transfer Tax at a Glance
In B.C., property transfer tax (PTT) is a provincial tax to be paid for registration of a new property title with the Land Title and Survey Authority. It is paid after filing a property transfer tax return. This is quite different from the property taxes paid on an annual basis by a property owner. Unlike these, PTT is paid once outright by the new recipient. Many forms of property transfer are subject to this tax, from transfer of fee simple to lease modification agreements, foreclosure, valuation of life estates, and more. 1% is charged on the first $200,000 of fair market value, 2% on the portion from $200,000 to $2 million, 3% on the portion greater than $2 million, with an additional 2% on the portion greater than $3 million if the property is residential.
Assessment of Fair Market Value
PTT is calculated based on the fair market value of the property on the date of the new title registration. In cases of open market purchases, FMV is typically deemed to be equal to the purchase price. However, if registration did not occur immediately after purchase, extra steps may be necessary to verify FMV in the event that the value or condition of the property changed. For non-open market property transfers, such as gifting, FMV must be verified with a recent appraisal by an independent party or a valuation from BC Assessment. Keep in mind that BC Assessment only indicates the value of the property as of July in the previous year, which may not be usable if certain changes to the property or its market conditions have occurred since.
Fortunately, PTT exemptions are available depending on your circumstances and eligibility, including those applying to certain first-time home buyers, newly built homes, vacant land, and more. Perhaps most pertinent to estate planning, however, are the family exemptions. Transfer of a principal or recreational residence between what are deemed as “related individuals” may be exempt. Be wary, however, that certain relatives such as siblings and cousins do not qualify as such. Property transfer during marriage breakdown, as outlined by a written separation agreement or court order, may also be exempt. Ask your estate planning office what exemptions and strategies can help you minimize your tax burden when buying or receiving property in B.C.As Canada’s most prestigious and respectable family office, MacMillan Estate Planning will go further than simply help you with your estate documents. Our team is made up of tax specialists, financial planning experts, and so much more. If you’d like to know about estate planning, register for a complimentary seminar today!