Hello everyone, this is Paul Choi from the Juris Notary office. I began a series on Property Transfer Tax (PTT) exemptions and this will be the last in the series.

There are exemptions or reduction related to the Property Transfer Tax in the province of British Columbia, but clients are often unclear as to their qualification for an exemption. There are currently 20 types of exemptions available and I will talk about one of the more common exemptions that the buyers may be eligible for: Transfer of a Principal Residence exemption, often referred to as a Family Transfer exemption.  

This exemption seems to exist to allow family members to transfer a property to their defined related individuals, either for an estate distribution purposes or as an outright gift.

Similar to other exemptions, there are many conditions that the Property Transfer Taxation branch has imposed on the Family Transfer exemptions.

Again, I found that there are many incorrect or incomplete information out there in the news articles or online resources, so for full and accurate information, please refer to the official BC government website.

Before we delve into the conditions that needs to be satisfied for the exemption eligibility, we need to define what the “related individual” is for the purposes of the Family Transfer exemption:

A related individual includes:

  • Your spouse, child, grandchild, great-grandchild, parent, grandparent or great-grandparent
  • The spouse of your child, grandchild or great-grandchild
  • The child, parent, grandparent or great-grandparent of your spouse
  • Child includes a stepchild.

Your spouse is:

  • a person who you are legally married to, or
  • a person who you are living and cohabitating with in a marriage-like relationship, provided that you have been living and cohabitating in that relationship for a continuous period of at least two years.  This includes a marriage-like relationship between people of the same gender.

This means your sister, brother, uncle, aunt, niece or nephew is not considered to be a related individual – for that reasons, you are required to pay PTT if your brother or sister transfers a principal residence to you.

The conditions that need to be met in order for you to qualify for a full or partial exemption for the Family Transfer can be broken down into 2 groups:

First there are requirements related to the buyer:

  • a Canadian citizen or permanent resident (you will be asked to provide your Social Insurance Number (SIN) or proof of permanent residency and your birthdate)
  • A trustee is not involved in the transfer
  • The property that you are acquiring has been the principal residence of either you or the transferor for a continuous period of at least six months immediately before the transfer.  To meet this requirement, you need to register the transfer with the land title office while the person who has been living on the property for the required period of time is still living on the property.

These are requirements related to the property:

A property is considered to be a principal residence if it meets the following four criteria:

  1. Before the transfer, either you (the transferee) usually resided and used the property as your home, or the person transferring the property to you (the transferor), usually resided and used the property as his or her home

When a trustee is involved in a transfer, the trustee becomes the transferor and this requirement applies instead to the settlor or the deceased.

  1. The improvements on the land (e.g. buildings) are designed to accommodate, and do in fact accommodate, three families or less
  2. The improvements on the land are classified as residential by BC Assessment
  3. The land is 0.5 hectares (1.24 acres) or smaller

To qualify for a full exemption from PTT, the entire property must meet these requirements, regardless of the interest in the property that may actually be transferred.  

It is also important to remember that a person can only have one principal residence at a time.

Now even if you don’t meet the above property related criteria, if meet the below conditions you may be eligible for a partial exemption.

You may qualify for a partial exemption from the tax if the property:

If the principal residence you receive is on land larger than 0.5 hectares (1.24acres), and/or there are improvements on the land that are not classified as residential, but the transfer meets all of the other requirements for an exemption, you do not pay PTT on:

– the portion of the fair market value of the land that is equivalent to the ratio of 0.5 hectares to the total area of the land, and/or

– the fair market value of the improvements on the land that are classified as residential by BC Assessment.

For example, the principal residence you are acquiring an interest in is 2 hectares.  In this case, you pay PTT on the portion of the fair market value of the land that is equal to 1.5 hectares (2 hectares less .5 hectares).

The Family Transfer exemption is an important tool that allows a family member to gift or pass down their assets to each other without being subject to a property transfer tax. However, like many other exemptions, you have to carefully pay attention to the details of the eligibility to ensure you are eligible for the exemption. Two of the most commonly forgotten conditions for the Family Transfer exemption is that transfer between siblings are not eligible and require either a transfer or transferee to have resided in the property for at least 6 months immediately before the transfer. Because of this 6 months principal residency requirement, it is important that the involved party change their legal address to that property you wish to transfer by changing all your official records 6 months before the property transfer.  

Additionally, even if you are exempted from the Property Transfer Tax, you may be subject to the Capital Gains Tax as a transferor; therefore, please consult a chartered accountant before proceeding with the property transfer.

It seems that the Property Transfer Taxation Branch is following up more often than before and demand more documentation or evidence to confirm your eligibility of any exemption that you received. Given that the potential consequences can result in a significant legal risk, it is crucial that you confirm the exemption requirements directly from the official BC government website or from a qualified professional.

If you have further questions, please do not hesitate to contact our office and speak to myself or any of my friendly staff.  

This is for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind.