The BC Property Transfer Tax (the “PTT”) is a value added tax payable by purchasers who acquire an interest in property.
The actual tax rate is 1% on the first $200,000 of the fair market value of the property being transferred, plus 2% on the fair market value over $200,000. For example, a purchaser acquiring a property with a fair market value of $300,000 will have to pay an additional amount of PTT as follows:
- $2,000 – being 1% of $200,000
- $2,000 – being 2% of the remaining $100,000 balance
- $4,000 – total PTT payable in addition to the purchase price
For all purposes, the tax is payable on the “fair market value” of the land, plus all improvements on that land at the time of registration.
The calculation of “fair market value” is generally the price paid by the purchaser as long as the property was offered for sale in the open market. If a tax return is reviewed, a purchaser may be asked to provide evidence as to how they knew the property was for sale. In instances where no money changes hands or the transfer did not take place in the open market, the fair market value must be determined by other means, such as an independent appraisal or by reference to the most relevant BC Assessment value. Failure to pay PTT based on fair market value will usually result in a re-assessment of the tax payable by the purchaser.
A major exemption to the PTT is the BC First Time Home Buyers’ Program. Under this program, first time home buyers purchasing a property as a principal residence can claim a full exemption from the tax if the fair market value of the home is less than $425,000. The property must also be 0.5 hectares (1.24 acres) or smaller. If the property does not meet one of these two requirements, a first time home buyer may still qualify for a partial exemption. Also, if the property value does not exceed the threshold amount of $425,000 by more than $25,000, a proportionate exemption is available.
The program requires that the property be occupied within 92 days of the date of registration and continue to be used as a principal residence for at least 1 year after registration. The application for a refund under the program must be made within 18 months of the registration date.
In addition to the First Time Home Buyers’ Program, there are a number of other exemptions to the BC Property Transfer Tax. This includes the transfer of property between spouses in the breakdown of a marriage, or transfer of property to a registered charity. A variety of other exemptions also exist.
For more information on the PTT or on buying or selling a home, please contact Curtis Darmohray at (250) 869-1125 or at [email protected].
