Calculating Property Transfer Tax
Property Transfer Tax, often abbreviated to “PTT”, is a tax that is triggered upon change to a real property’s title. This include not only purchases of real estate, but any type of transfer of real estate from one person to another. It is worth noting however, there are a variety of exemption that are available upon the fulfillment of certain conditions. In this Article, we will provide an overview of how PTT is calculated, which will include how PTT is applied to residential real estate transactions, commercial real estate transactions.
Property Transfer tax is calculated using the fair market value of the land and improvements (buildings) on the date of registration, unless it is a purchase of a pre-sale unit. The fair market value, in this case, is the purchase price paid by a willing purchaser to a seller for a real property in the open market. Where the property transfer is between related individuals, such as a mother’s transfer of her home to a son, the fair market value is determined differently. Instead, the fair market value of a real property in a transfer between related individual is determined through a recent independent appraisal or the property value assessment as provided under BC assessment. Note however, there are certain situations in which the BC assessment values may not be used, notably, when:
Changes have been made to the property (e.g. rezoning) since the assessment
Market conditions in the area of the property have changed since the assessment
The land is classified as farm land
New or additional construction has been completed
The property transfer tax rate for residential properties is as follows:
1% on the first $200,000,
2% on the portion of the fair market value greater than $200,000 and up to and including $2,000,000,
3% on the portion of the fair market value greater than $2,000,000 up to and including $3,000,000, and
5% on the portion of the fair market value greater than $3,000,000.
The property transfer tax rate for commercial properties is as follows:
1% on the first $200,000,
2% on the portion of the fair market value greater than $200,000 and up to and including $2,000,000,
3% on the portion of the fair market value greater than $2,000,000.
Common Property Transfer Tax Exemptions For Buyers
1. First Time Home Buyers' Program
To qualify for a full exemption, at the time the property is registered (the closing date of your transaction) you must:
be a Canadian citizen or permanent resident
have lived in B.C. for 12 consecutive months immediately before the date you register the property or filed at least 2 income tax returns as a B.C. resident in the last 6 years
have never owned an interest in a principal residence anywhere in the world at any time
have never received a first time home buyers' exemption or refund
and the property must:
be located in B.C.only be used as your principal residence
have a fair market value of $500,000 or less (Partial exemption available for properties with fair market value up to $525,000); and
be 0.5 hectares (1.24 acres) or smaller.
After your property has been registered, you must additionally:
moved into your new home within 92 days ; and
continued to live the property as your principal residence for the remainder of the first year (you may still keep part of your exemption if you fail this continuous occupancy requirement)
Please note the above is a quick summary of the most common application of the First Time Home Buyer's Program. For the comprehensive guide please click here.
2. Newly Built Home Exemption
The Newly Built Home Exemption reduces or eliminates the amount of property transfer tax you pay when you purchase a newly built home.
A newly built home includes:
a house constructed and affixed on a parcel of vacant land;
a new apartment in a newly built condominium building;
a manufactured home that is placed and affixed on a parcel of vacant land;
an already constructed house that is removed from one parcel of land and affixed to another parcel of vacant land, as long as the house hasn’t been occupied since it was placed on the new parcel of vacant land;
a house resulting from the division of an existing improvement affixed to a parcel of land that was also subdivided, as long as this house hasn’t been occupied since the subdivision of the parcel
a house converted from an existing improvement on the land. The previous improvement couldn’t have been used as residential (e.g. a warehouse converted into apartments)
and the property must also:
be located in B.C.only be used as your principal residence;
have a fair market value of $750,000 or less (Partial exemption available for properties with fair market value up to $800,000); and
be 0.5 hectares (1.24 acres) or smaller.
After your property has been registered, you must additionally:
moved into your new home within 92 days ; and
continued to live the property as your principal residence for the remainder of the first year (you may still keep part of your exemption if you fail this continuous occupancy requirement)
For more information please contact us at 604-434-2977 (Vancouver) or 604-674-8896 (Richmond)