Hello everyone, this is Paul Choi from Juris Notary office. I would like to start a series on Property Transfer Tax (PTT) exemptions.
There are exemptions or reduction related to the Property Transfer Tax in the province of British Columbia, but clients are often unclear as to if they qualify for the 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: First Time Home Buyer (FTHB) exemption.
I often have clients come to my office and ask that since they are buying a property for the first time, they were told that they are exempted from paying the property transfer tax. This may be true but only if you meet the many conditions that the Property Transfer Taxation branch has imposed.
Unfortunately 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.
The conditions that needs to be met in order for you to qualify for a full or partial exemption under the FTHB program can be broken down into 2 groups:
First there are requirements related to the buyer:
- 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
These are requirements related to the property:
- be located in B.C.
- only be used as your principal residence
- have a fair market value of:
$475,000 or less if registered on or before February 21, 2017, or
$500,000 or less if registered on or after February 22, 2017
- be 0.5 hectares (1.24 acres) or smaller
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:
- has a fair market value less than:
$500,000 if registered on or before February 21, 2017, or
$525,000 if registered on or after February 22, 2017
- is larger than 0.5 hectares
- has another building on the property other than the principal residence
If you qualify for partial exemptions, you can visit the following link to find out the amount of your exemption.
Refund
Unfortunately, foreign entities and taxable trustees are not eligible for the exemption. If you don’t qualify because you are not a Canadian citizen or permanent resident, but you become one within 12 months of when the property is registered, you may apply for a refund of the property transfer tax. It is important to know you must apply within 6 months of obtaining the permanent residency or citizenship.
If you need an assistance on filing for the refund, please contact our office.
Penalty for false Declaration
It seems that all applications are reviewed by the Property Transfer Taxation Branch and the rate in which they follow up with those who have received an exemptions have certainly spiked in recent years. You will be charged a penalty equal to double the tax if you falsely declare that:
- you have never owned an interest in a principal residence anywhere in the world at any time, or
- you have never received a first time home buyers’ exemption or refund
First Year of Ownership
The requirement doesn’t end there as additional to the conditions you have to meet before getting the exemptions, there are conditions that you must meet after getting the exemption to quality.
At the end of the first year you own the property you will receive a letter from the PTT Branch. The letter is to conditionally confirm that you meet the occupancy and property value requirements after you:
- purchased an existing home, or
- purchased vacant land and built a home
To keep the tax exemption you must have:
- moved into your home within 92 days of the date the property was registered, and;
- continued to occupy the property as your principal residence for the remainder of the first year
You may keep part of the exemption if you moved out before the end of the first year.
But if the owner passed away, or the property is transferred because of a separation agreement or a court order under the Family Law Act before the end of the first year, you still qualify to keep the tax exemption.
Below is the link to the info sheet that has more details about the FTHB exemption.
First Time Home Buyer exemption is one of the more commonly misunderstood exemption that may result in new buyers having to pay an unexpected tax due to receiving a wrong or incomplete information. I found that often times clients were not aware of the purchase price limit, the 12 month BC residency, or the one-year principal residency requirements.
This may lead to miscalculation of your budget and require last minute scramble for extra funds or lead to failure of completion on a transaction. Given that the potential consequences can result in a significant legal risks, it be crucial that you confirm the exemption requirements directly from the official BC government website or from a qualified professional.
Next column I will discuss the exemptions available for New Home purchases and a family transfer.
If you have further questions, please do not hesitate to contact our office at (778-379-8577) and speak to Paul Choi or any of our friendly staff.
- This is for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind.