Recent Changes to the Property Transfer Tax

The tax one must always consider when purchasing or acquiring any real estate in BC is the Property Transfer Tax. For our previous post on the subject, please click HERE

But on February 20, 2018, the BC NDP Government’s Budget made some changes to the Property Transfer Tax.

1. What is the Property Transfer Tax

When you purchase or acquire an interest in a property that is registered at the Land Title Office, you will be required to pay property transfer tax.

A traditional purchase of real estate between two complete strangers seems straightforward enough. But property transfer tax may be payable when a family member gifts you real estate.

2. How much is the Property Transfer Tax

Before the Budget, the property transfer tax was calculated as follows:

1. 1% on the first $200,000 of the fair market val
2. ue of the property,
3. 2% on the portion of the fair market value greater than $200,000 and up to and including $2,000,000, and
4. 3% on the portion of the fair market value greater than $2,000,000

After the Budget, the property transfer tax is now calculated as follows:

1. 1% on the first $200,000 of the fair market value of the property,
2. 2% on the portion of the fair market value greater than $200,000 and up to and including $2,000,000,
3. 3% on the portion of the fair market value greater than $2,000,000,
4. Further 2% on the portion of the fair market value greater than $3,000,000

If the fair market value of a property classified entirely as residential is $4,500,000, the tax paid is $143,000.00:

1. 1% on the first $200,000 = $2,000
2. 2% on portion greater than $200,000 and up to and including $2,000,000 = $36,000 ($2,000,000 – $200,000 = $1,800,000 X 2% = $36,000)
3. 3% on portion greater than $2,000,000 = $75,000 ($4,500,000 – $2,000,000 = $2,500,000 X 3% = $75,000)
4. A further 2% on the portion greater than $3,000,000 = $30,000 ($4,500,000 – $3,000,000 = $1,500,000 X 2% = $30,000)
5. $2,000 + $36,000 + $75,000 + $30,000 = $143,000.00

Under the old rate, the amount of the Property Transfer Tax for a exactly valued home was $113,000.00. That is an additional $30,000.00 in Property Transfer Tax that the Purchaser would have to pay.

3. Factors to Consider

The changes to the Property Transfer Tax really affect the upper market, those acquiring homes with fair market values of over 3 million dollars.

Note that this change became effective on February 21, 2018. Even if you entered into a contract of purchase and sale before February 21, 2018 but your Completion Date is on or after February 21, 2018, the new rate will apply.

The calculation of the Property Transfer Tax is no longer as clear-cut as it used to be. The BC Government used to have a Property Transfer Tax Calculator, but as of the time when this blog post was published, it does not appear that the calculator has been updated.

Conclusion

In future blog posts, I will be discussing the Additional Property Transfer Tax that foreign purchasers may have to pay. If you have any questions about this post, please contact Lewis Nguyen at lewis@dbmlaw.tempbuild.net or 604-937-6373.