Land Transfer Tax in B.C.
If you are a home buyer in British Columbia, and you’ve recently begun the closing process on your new home you’ve probably seen references to the term land transfer tax, or property transfer tax. You’re not the first to ask, “What is land transfer tax?” It’s a common question among first time home buyers.
The land or property transfer tax is a sum of money paid through closing costs when the property is registered through the Land Title and Survey Authority. These taxable transactions are usually processed by a lawyer, and can include life estate, foreclosure, crown grant, transfer for corporate reorganization purposes, modification agreements, or the right to purchase as a sale.
Throughout this land transfer tax guide, we will explore who pays the tax, how you can calculate the sum to be paid, as well as frequently asked questions about the tax for 2019.
Who Pays Land Transfer Tax in B.C.?
The land transfer tax act is always paid by the buyer of a house, rather than the seller. This is because the new homeowner is gaining interest in the property when it becomes registered. Foreign buyers are subject to additional transfer tax.
How to Calculate Land Transfer Tax in B.C.
So, how much is land transfer tax in British Columbia? The tax is based on the fair market value of the land and any improvements which have been made to it. These calculations are determined by the value at the time of registration and are different than your annual property taxes. Foreign nationals calculate their municipal land transfer tax using the same method but must also pay an additional tax within certain areas of the province, such as greater Vancouver and Fraser Valley, when purchasing residential properties.
Your tax rate is calculated by taking 1% of the initial $200,000 value of your property and adding 2% of any additional value between $200,000 and $2,000,000. Anything exceeding $2-million requires a further 3% of the fair market value on the amount over the $2-million mark added onto it. For home buyers shopping in the $3,000,000 and up range, an even further 2% of the fair market value on this portion must also be included.
Property transfers get audited by the federal and provincial government, so if you haven’t paid your property tax you may receive an assessment in the mail. This assessment can be appealed if you feel you should be exempt from the provincial land transfer tax.
B.C. Land Transfer Tax Rebate
There are some exemptions from the land transfer tax rule which apply to first time home buyers. To qualify, you must be a permanent resident of Canada or a Canadian citizen, have lived in British Columbia for at least 12 months before the property registration date, and have never owned a home or received the first time home buyer’s exemption rebate before. The property you register must also meet some qualifications including not exceeding the fair market value of $500,000, that the land is to be used as a residential property, and that the land doesn’t exceed 1.24 acres. Individuals who don’t qualify for the exemption may still receive a partial rebate.
Land Transfer Tax for First Time Home Buyers: Rebate Calculation
The first time home buyer land transfer tax rebate can be calculated as follows:
Homes of $475,000 or less: Properties registered at the fair market value of $475,000 or less on or before February 21, 2017 receive a full land transfer tax rebate. For example, a home which is $200,000 pays 1% of the value, making the tax $2000. This $2000 is completely refunded because the house value is less than $475,000.
Homes of $475,001 to $500,000: Properties registered at the fair market value of $475,001 to $500,000 on or after February 22, 2017 will receive a full rebate. Homes registered at this value before February 22, 2017 are eligible for a partial rebate.
Homes of $500,001 – $525,000: Properties registered at the fair market value of $500,001 to $525,000 on or after February 22, 2017 qualify for a partial rebate. For example, a property registered at $507,000 would have an exemption amount of $5,860.80 and a tax payable amount of $2,279.20.
A list of the exemption amounts and total amounts due for property transfer tax in B.C. based on fair market values are listed through the BC government website.
2019 Land Transfer Tax B.C. Common Questions
As a new home buyer, it’s important to be informed about all the possible financial situations you could encounter. When it comes to land transfer tax in British Columbia, here are a few of the most frequently asked questions received by mortgage brokers in Vancouver.
What are the Land Transfer Tax Exemptions?
Aside from the first time home buyer land transfer tax exemption there are several other reasons which could result in a reduced tax or rebate. These exemptions include:
- Transfers made to registered charities
- A transfer following a claim for bankruptcy
- Transfers made for company amalgamation
- The transfer of a new home build
- Transfers made to correct a conveyance error
- Registrations for more than one lease on a single property
- Transfers made under the VLA or Veterans Land Act of Canada
- Transfers made as forfeits to or from the Crown
- Status Indian land transfers
- Transfers for subdividing properties
- Transfers from a trustee to a minor
- Registration for an agreement of sale
Do You Pay Land Transfer Tax When Selling?
No, land transfer tax is always paid by the buyer of a property upon land registration.
How to Avoid Land Transfer Tax
The best way to avoid paying land transfer tax is by being a first time home buyer or looking into the above listed categories warranting exemption. You can also buy a less expensive home to reduce the amount of property tax you pay in British Columbia.
Do You Pay Land Transfer Tax Between Family Members?
When transferring land between family members, the receiving individual is exempt from transfer tax if the property is being transferred due to the termination of a marriage, is being transferred as part of a family farm corporation, is being transferred as a recreational residence, or is being transferred as a primary residence. Each of these exemptions has its own set of principles governed by the Ministry of Finance.
Can Land Transfer Tax Be Added to Mortgages in B.C.?
No, unfortunately, closing costs can’t be financed as a portion of your mortgage in BC, but are a separate entity paid by the buyer. It’s important to factor in all closing costs, including land transfer tax, when you begin saving for a piece of land or a house.
Land transfer tax in British Columbia is one of the standard costs associated with buying a house. Before committing to a purchase you may want to discuss closing costs, such as the land transfer tax, with your real estate team and lawyer to determine how affordable it will be and whether you should choose a less expensive house based on the feasibility of these costs.
- Government of British Columbia. (2018) Property transfer tax. Government of British Columbia. Retrieved on October 18, 2018 from View reference
- Government of British Columbia. (2018) First time home buyers. Government of British Columbia. Retrieved on October 18, 2018 from View Reference
- Government of British Columbia (2018) First time home buyers’ exemption amounts. Government of British Columbia. Retrieved on October 18, 2018 from View Reference