It is important for everyone who is considering buying a home or any property to understand the concept of property transfer tax (“PTT”), especially given the current value of properties in Vancouver and its surrounding areas. PTT is applicable whenever you make changes to a property’s title and is potentially payable by the individual(s) who will be newly registered on title. This also includes situations in which you may become the registered holder of a lease, life estate, or right to purchase. The amount of PTT payable is based on the fair market value (“FMV”)of the property on the date of registration at the land title office. Prior to February 16, 2016, PTT was charged at 1% on the first $200,000.00 of the property’s FMV and 2% on the remainder of the property’s FMV.
Effective February 16, 2016, the PTT rate has changed such that tax is charged on the property’s FMV as follows: 1% on the first $200,000.00, 2% on the portion that is greater than $200,000.00 and up to and including $2,000,000.00, and 3% on the portion that is greater than $2,000,000.00.
As aforementioned, PTT is potentially payable by individuals who gain an interest in property. There are exemptions available that could help reduce or eliminate the PTT that is payable. Some of the more common exemptions are:
1) Principal residence exemption;
2) First-time home buyer exemption; and
3) Newly built home exemption (new exemption effective February 16, 2016).
Effective February 16, 2016, a new exemption is available for individuals purchasing a “newly built home”. This exemption offers either a full or partial exemption from PTT. Homes with a FMV of $750,000.00 or less will be fully exempt from PTT, while homes with a FMV that is greater than $750,000.00 and less than $800,000.00 will be partially exempt from PTT. To qualify for the exemption, the property must be located in British Columbia, used as the individual’s principal residence, and 0.5 hectares (1.24 acres) or smaller. The applicant must be an individual who is a citizen or permanent resident of Canada.
For a PTT calculator, a full list of PTT exemptions (with eligibility requirements), and more information on PTT, visit the Government of BC.
If you are interested in purchasing a property or buying a new home and want to speak to a lawyer about the steps that are involved, please feel free to contact our office to schedule a consultation!