Property transfer tax is often the largest closing cost when you buy a home in BC. It is important to plan ahead for property transfer tax and consider your eligibility for land transfer tax exemptions.
What is property transfer tax?
Property transfer tax (“PTT”) is essentially a land registration tax. It is due whenever you purchase or gain an interest in property, provided that the transfer in question is a taxable transaction. PTT must be paid in full at the time of registration of the property transfer at the Land Title Office. It is not the same as annual property taxes: property transfer tax is a one-time tax due when property changes hands, whereas property taxes are paid for each year of ownership to fund services in the area of the property.
Who pays the property transfer tax in BC?
In BC, the buyer is responsible for paying the property transfer tax. BC buyers must also file the property transfer tax return when registering the property conveyance. If you have a real estate lawyer assisting you with your purchase, your lawyer will calculate the tax payable, prepare the necessary documents, and file everything on your behalf.
How is property transfer tax calculated?
PTT is based on “fair market value,” which is the price a willing purchaser would pay for the property on the open market on the date of registration. In most cases, fair market value is the purchase price stated in the Contract of Purchase and Sale. Property transfer tax is calculated using the following rates:
- 1% on the first $200,000;
- 2% on the portion greater than $200,000 and up to $2,000,000; and
- 3% on the portion greater than $2,000,000 and up to $3,000,000.
To get a general idea of the amount of property transfer tax you would have to pay when buying a property, enter the purchase price into a property transfer tax calculator. Bear in mind that these online calculators can only provide an estimate. There are unique rules that may apply. For example, if the property is residential, an additional 2% applies on the portion greater than $3,000,000. If you are a foreign national, foreign corporation or taxable trustee, you will have to pay additional property transfer tax on residential property transfers within specified areas of BC. For the precise calculation of PTT in your situation, the best course of action is to contact an experienced real estate conveyancing lawyer.
Do I qualify for land transfer tax exemptions?
If your real estate purchase falls within one of the land transfer tax exemptions, you may be able to reduce or eliminate the amount of PTT payable. The most common land transfer tax exemptions in BC are the First Time Home Buyers’ Program and the Newly Built Home Exemption. That being said, there are many other land transfer tax exemptions, including Family Exemptions and exemptions for transfers between spouses in accordance with a Court Order or written Separation Agreement. Each land transfer tax exemption has its own eligibility criteria. To find out if you are eligible for a land transfer tax exemption, contact Invicta Law Corporation today for dependable advice.