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: Newly Built Home (NBH) exemption.
This exemption does not seem to be as well-known as First Time Home Buyers (FTHB) exemption that I discussed in the last column but it is still claimed very often. This is probably due to the fact that the NBH exemption is relatively new – it was first introduced on February 16, 2016. It was initiated by the provincial government at the time, in order to give an incentive for developers to build more properties in BC and to entice the potential home buyers to consider purchasing new homes.
Similar to FTHB and other exemptions, there are many conditions that the Property Transfer Taxation branch has imposed.
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.
The conditions that needs to be met in order for you to qualify for a full or partial exemption under the NBH program can be broken down into 2 groups:
First there are requirements related to the buyer:
- an individual
- 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)
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 $750,000 or less
- 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 greater than $750,000 and less than $800,000
- 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.
Occupancy requirements
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 newly built 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.
Newly Built Home exemption has less conditions than FTHB exemptions but one of the more commonly forgotten condition by the clients is the one-year principal residency requirements – you must move in live in the property as a principal residence for at least a year. Given that buying a pre-sale has become a popular investments by many clients, they often buy it to rent out the suite and this would disqualify you from the NBH exemptions.
Additionally, many clients fail to consider that the newly built homes are subject to 5% GST. 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 property transfer between a family members.
If you have further questions, please do not hesitate to contact our office and speak to myself or any of my friendly staff. Please note this is for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind.