Congratulations! You’re looking to buy a house in BC. Or perhaps you’ve found the one you like and are ready to make an offer. But before that, make sure you know and understand the closing costs associated with the sale – especially the Property Transfer Tax.
Regardless if it’s your first time home buying experience or not – as a buyer, you should be aware of what a Property Transfer Tax is.
As your Maple Ridge and Coquitlam Realtor specialists, we have prepared this blog to answer all your questions, including what it is, who pays it, how much it is, exemptions, and how to calculate Property Transfer Tax.
Property Transfer Tax BC – What Is It?
Similar to the Land Transfer Tax in other Canadian provinces, the Property Transfer Tax is a fee you must pay to the government when you purchase a property. It should be paid at the time the title of the property is transferred to the new owner.
It is a one-time provincial tax where the new buyer owns the property. An important note is not to mistake the Property Transfer Tax with annual property taxes, a tax paid yearly to the city your property is located in.
Who Pays Property Transfer Taxes?
The buyer incurs the Property Tax fee after completing the home purchase process. If you’re selling the house, you don’t pay the fee in this transaction. Nevertheless, there are some exemptions to the Property Transfer Tax for which buyers don’t have to pay.
Property Transfer Tax Exemptions
There are many occasions wherein you can qualify to reduce the amount of Property Transfer Tax you have to pay. The two most common ways to avoid the Property Transfer Tax are the First Time Home Buyer Program and Newly Built Home Property Transfer Tax Exemption.
- First Time Home Buyer Program
If you’re purchasing a property for the first time, this program exempts buyers from paying the Property Transfer Tax if you qualify in specific criteria, such as:
- You’re a Canadian citizen/ permanent resident that has never owned a property that was your primary residence anywhere in the world.
- In addition, the newly bought property must have a fair market value of $500,000 or less and be less than 0.5 hectares.
You may also qualify for a partial exemption if the property value is less than $525,000 and is larger than 0.5 hectares.
- Newly Built Homes
If you’re purchasing a home that was newly built, you can qualify for a Property Tax exemption if:
- You’re a Canadian citizen/permanent resident who purchases a home with a market value of less than $750,000 and is smaller than 0.5 hectares.
Or you may qualify for a partial exemption if the home has a market value between $750,000 and $800,000 and is larger than 0.5 hectares.
There are other less common Property Transfer Tax BC exemptions. These include family exemptions, transfers of property ownership to a registered charity or even following a bankruptcy.
For more information on property transfer tax and what may qualify for an exemption, contact our team of Maple Ridge and Coquitlam REALTORs for a free, no-obligation consultation.
How Much Is the Property Transfer Tax?
Property Transfer Tax BC calculation is based on the fair market value of the property. In other words, based on the purchase price at that time, as seen on the contract of purchase and sale.
The property transfer tax for Canadian citizens/permanent residents is different based on the property price, as shown below:
|Purchase Price (Market Value)||Property Transfer Tax|
|First $200,000 of the purchase price||1%|
|$200,000 up to $2,000,000 of the purchase price||2%|
|Portion of the purchase price above $2,000,000||3%|
|Portion of the purchase price over $3,000,000||2%|
If you’re a foreign buyer, you will pay the PPT as outlined above PLUS an additional PPT of 20%. Of course, come January 2023, there is a ban on all foreign buyers for two years.
How To Calculate Property Transfer Tax BC
Calculating the Property Transfer Tax for your newly acquired property can be quite simple once you understand it.
Remember, you’ll have to pay 1% of the purchase price on the first $200,000 and an additional percentage depending on the remaining balance of the home purchase price.
For instance, if you’re buying a house whose purchase price is $950,000, you’ll calculate the Property Transfer Tax as follows:
- 1% of the first $200,000 → 0.01 * 200,000 = $2,000
- 2% on the portion greater than $200,000 up to $2,000,000
- The remaining portion of the purchase price is the original purchase price minus $200,000. In this case, $950,000 – $200,000 = $750,000
- 2% of $750,000 = $15,000
- Since the purchase price of $950,000 has no remaining balance above $3,000,000, you’ll stop at step 2.
Your total Property Transfer Tax would be $17,000, due at the time of completion.
If your purchase price is above $3,000,000, for instance, $5,500,000 – you’ll calculate the Property Transfer Tax as follows:
- 1% of the first $200,000 → 0.01 * 200,000 = $2,000
- 2% on the portion greater than $200,000 but up to $2,000,000
- The remaining portion of the purchase price is the original purchase price minus $200,000. In this case, $5,500,000 – $200,000 = $5,300,000
- Since you’ll be taxed 2% up to $2,000,000 of the purchase price, and in this case, your price is above that, you’ll be charged 2% of the balance from $200,000 up to $2,000,000
- 2% of $1,800,000 ($2,000,000 – $200,000) = $36,000
- 3% on the portion of the purchase price above $2,000,000
- You’ve already been taxed up to the $2,000,00 of your total purchase price, therefore you’ll need to calculate the remaining balance of the total price minus $2,000,000 first.
- $5,500,000 – $2,000,000 = $3,500,000.
- Thus, you’ll be charged 3% on $3,500,000 = $105,000
- A further 2% is charged on the portion greater than $3,000,000.
- The original purchase price is $5,500,000, and the balance of the price greater than $3,000,000 is $2,500,000.
- 2% of $2,500,000 = $50,000
The total Property Transfer Tax due for a house price of $5,500,000 would be $2,000 + $36,000 + $90,000 + $50,000 = $193,000.
Did you know that hiring a realtor to assist in your home-buying process is a free service? Our team will take most of the stress and guesswork of calculating Property Transfer Tax BC when buying a home in BC. Contact us today for any assistance in your purchase process.
However, we are not lawyers, accountants, or tax experts, and therefore all further/deeper inquiries should be directed to those experts in that field.
Still Got Questions?
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“This blog post is not intended as advice and is to be used for information purposes only. We recommend all readers seek advice from their own REALTOR® or other professional and legal advice as required. This information is not intended to form an agency relationship with any of the readers”.