General Application of Property Transfer Tax (PTT)
Property transfer tax (PTT) is a provincial tax payable by all persons acquiring interest(s) in property in British Columbia. Most commonly, an acquirer of an interest in property is a buyer who purchases a property from an arms-length seller, but an acquirer can also include persons receiving property through family transfers (with or without paying full value) or by outright gift. This means that how a property is acquired and the price that the acquirer pays has no impact on the application of PTT. Instead, PTT is concerned with the Fair Market Value (FMV) of a property. FMV is the price that the property would get if it was sold on the open market, in a competitive setting, to an unrelated, third-party buyer. FMV is not necessarily the same as the latest BC assessment, but rather, it is based on the market at the time of the transfer of interest in the property.
Rates of Property Transfer Tax (PTT)
The amount of PTT payable is based on the FMV of the property, in proportion to the percentage of interest being acquired, at the following taxation rate:
- 1% on the first $200,000.00; and
- 2% up to and including $2,000,000; and
- 3% up to and including $3,000,000; and
- 5% on values over $3,000,000
For example, if Anna buys a property with a FMV of $1,000,000, Anna will pay the full $18,000 of PTT on completion. (1% on $200,000 = $2,000; 2% on $800,000 = $16,000; $2,000 + $16,000 = $18,000). But, if Anna buys the same property with her sister, Elsa, the amount that each sister pays in PTT is proportional to her share of ownership in the property. So, if Anna buys 60% of the property and Elsa buys 40%, then Anna pays $10,800 and Elsa pays $7,200 to comprise the total PTT. (Note: the total PTT payable does not change – only the assignment of the tax to each person).
Property Transfer Tax (PTT) Payments & Exemptions
PTT is payable on the Completion Date, upon registration of each and every property transfer filed at the Land Title Office, unless acquiring party(ies) qualifies for an exemption from PTT. To claim an exemption, the acquiring party must meet all the criteria of the exemption for which they are applying. (Note: Criteria should be taken seriously; the penalty for making a false declaration is double the tax). Where 2+ people acquire interest in property at the same time, it is possible for all or some acquirers to claim a PTT exemption; if there are any persons not eligible for exemption, then those non-exempt persons must pay PTT in proportion to the interest in property that they are acquiring only.
Common PTT Exemptions & Criteria:
1. First Time Home Buyer PTT Exemption
Acquirer must:
- Be a Canadian Citizen or Permanent Resident of Canada;
- Have lived in BC for 12 consecutive months immediately before the date of registration OR filed 2+ income tax returns as a BC resident in the last 6 years;
- Have never owned an interest in a principal residence anywhere in the world at any time; and
- Have never received a first-time home buyer exemption or refund.
Property must:
- Be located in BC;
- Only be used as a principal residence;
- Have a FMV of $500,000.00 or less for NO PTT PAYABLE or
have a FMV of $835,000.00 or less to receive a PTT exemption on the first $500,000 (exemption value of $8,000.00); and - Be 0.5 hectares (1.24 acres) or smaller.
Partial Exemption if property:
- Has a FMV of more than $835,000.00 but less than $860,000.00; or
- Is larger than 0.5 hectares; or
- Has another building on the property other than the principal residence.
To keep the exemption the acquirer must:
- Move into the property within 92 days of the date from which the property is registered; and
- Continue to occupy the property as their principal residence for the remainder of the first year.
For other First Time Home Buyer tips and “to dos,” view our blog: Timelines, Tips and To-do’s: A Guide for First-Time Home-Buyers.
2. Newly Built Home PTT Exemption
Acquirer must:
- Be an individual; and
- A Canadian citizen or Permanent Resident of Canada.
Property must:
- Be located in BC; and
- Be used as the acquirer’s principal residence; and
- Have a FMV of $1,100,000.00 or less; and
- Be 0.5 hectares (1.24 acres) or smaller.
Partial exemption if the property:
- Has a FMV of greater than $1,100,000.00 and less than $1,150,000.00; or
- Is larger than 0.5 hectares; or
- Has another building on the property other than the principal residence.
To keep the exemption the acquirer must:
- Move into the property within 92 days of the date from which the property is registered; and
- Continue to occupy the property as their principal residence for the remainder of the first year.
3. Related Individual, Principal Residence PTT Exemption
Definitions:
Related Individuals: spouse, child, grandchild, great grandchild, parent, grandparent or great grandparent, spouse of a person’s child, grandchild or great grandchild, or the child, parent, grandparent, or great grandparent of a person’s spouse.
*Related Individuals must be Canadian citizens or permanent residents as defined in the Immigration and Refugee Protection Act (Canada).
Spouse: is a person who is married to another person or is living and cohabitating with another person in a marriage-like relationship and has been living and cohabitating in that relationship for a continuous period of at least 2 years.
Requirements:
A transfer of a principal residence or an interest in a principal residence to a related individual where either the transferee or the transferor resides on the property for the 6 months immediately prior to the transfer and the transferee is not a trustee.
4. Full list of all PTT exemptions
For a full list of all PTT exemptions, visit gov.bc.ca.
Disclaimer: the information provided in this article is meant to be used as a guideline and budgeting tool; it is not legal advice. If you are acquiring an interest in a property and have questions or need help with your transaction, give us a call: 604-576-3211.
