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The-Mortgage-Gal

Property Transfer Tax

On February 16th, the Liberal Government announced changes to the Property Transfer Tax. 

The two major changes:
• Exemption for new homes up to a purchase price of $750,000
• A new tier of 3% for properties over $2,000,000

Here are the highlights in a question and answer format:

Q: How will the government monitor the one year occupancy detail?

A:  As with the First Time Home Buyer (FTHB) exemption, the Ministry will send a letter to the purchaser at the end of the year to confirm compliance.

Q: If a client is a FTHB and purchases $550,000 used (not new) property, do they still pay Property Transfer Tax (PTT)?

A: Yes, the $475,000 limit remains the same for the FTHB's first property. The FTHB Exception values remain as they were.

Q: Does this apply to contracts already in place that haven't completed yet?

A: The new amendments to the PTT Act deal only with the registration date, not the date of the contract.

Q: For the New Housing Exemption of $750,000 is there any portion over $750,000 subject to 1% , or does it start at 2% on the portion over $750,000?

A: Much like the FTHM exception, a partial exemption is available where the fair market value is over $750,000 but less that $800,000.  If the price is $800,000 or more, PTT is payable on the entire price. So if the price is $801,000, PTT is on the entire amount, not just the last $1000.

Q: Does this apply to commercial property purchases?

A: Yes it does. This is significant, as many commercial/industrial/office buildings are valued quite high. There is a 3% tax on the value over $2,000,000 on these buildings.

Q: Is the exemption based on the pre-GST or net purchase price, or the purchase price including GST?

A;  We back out the GST from the price so that the PTT is calculated on net price, which must be under $750,000 for the full exemption.

Q: Can a buyer qualify for the FTHB or the New Housing Exemption even if they move here from another province?

A: For the FTHB exception, the buyer must be either a Canadian citizen or permanent resident AND have lived in B.C. for 12 consecutive months immediately before the date they take ownership of the property, or they have filed at least two income tax returns as a B.C. resident in the last six years. For the New Housing Exemption, the buyer must be an individual, and either a Canadian citizen or permanent resident. Note the difference, for the FTHB exemption there is a residency-in-BC requirement, but not for the New Housing Exemption.

Q: Does the New Housing PTT exemption apply to all real estate purchases whether they are principal residence or investment?

A: These exemptions only apply to principal residence, full PTT applies to investment properties.

Q: How does this ‘equal to or smaller than 0.5 hectare’ thing work with attached properties?

A: The attached property must be equal to, or less, than 0.5 hectare. This is not an issue with attached properties, at least not one that I have encountered before.

Q: For a property over $2,000,000, the PTT is first $200,000 for 1% , and then remaining is now 3% instead of 2%?

A: It is 1% on the first $200,000, 2% on values over $200,000 up to $2,000,000, and 3% on any value over $2,000,000.

Q: I have a realtor selling a newly constructed work/live townhouse. Retail space is on the main floor. Separate stratas, but sold as one unit. Assuming the buyer is living on the property, will they get the PTT waived even though the main floor is retail space?

A: If they are strata, the PTT is based on individual units and their values. There will be an exemption for the townhouse that is principal residence, but not for the retail portion.

Questions or comments, [email protected]

 

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About the Author

Laurie Baird and Tracy Head are mortgage brokers with Verico Complete Mortgage Services. Together they have over 45 years of experience in the mortgage industry.

As mortgage brokers, Laurie and Tracy spend time getting to know the people they work with and help them understand the mortgage process. They support their clients before, during, and after a home purchase.

Laurie and Tracy are able to offer their clients advice and options. With access to over 40 different lenders, Laurie and Tracy are able to match the needs of their clients with the right mortgage package. They work closely with their clients to find the right fit, and are around to provide support for years down the road!

Contact them at 250-862-1806 or visit:
http://www.okanaganmortgages.com

Visit Laurie's blog at: https://www.okanaganmortgages.com/blog



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