Taxes When Buying a Home
Taxes & Exemptions in Real Estate
Written By: Mariko Baerg, REALTOR of Bridgewell Real Estate Group
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There are taxes that you’ll need to be aware of when purchasing property in BC, which are typically due at the time of completion.
The most notable tables are property transfer tax, foreign buyer’s tax, and GST for buyers.
This blog also discusses any exemptions you may qualify for with regards to taxes on a purchase of a property in BC, and briefly goes over the non-resident withholding tax as a seller.
For everything you need to know about taxes when buying a home, read on!
Property Transfer Tax
Property transfer tax is a transaction based tax that is due at completion when purchasing a home.
Property transfer tax is calculated as:
- 1% on the first $200,000
- 2% on the balance up to and including $2,000,000
- 3% on the balance greater than $2,000,000
- if the property is residential, a further 2% on the portion of the fair market value greater than $3,000,000
Property transfer tax exemptions
First time home buyer property transfer tax exemption
To qualify for a full exemption of the property transfer tax, you must be a first time home buyer that is a Canadian citizen or permanent resident that has 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.
In order to qualify for the exemption, both you AND the property have to qualify. The property must satisfy the following:
- be located in B.C.
- only be used as your principal residence
- have a fair market value of $500,000 or less
- be 0.5 hectares (1.24 acres) or smaller
The first time home buyer exemption applies to resale properties; whereas, if the buyer were purchasing a presale property then the newly built homes exemption would apply. (as follows)
Newly built homes property transfer tax exemption
To qualify for the newly built home exemption you do not have to be a first time home buyer – it could be your first home purchase of your 10th home purchase! However, you do have to be a Canadian citizen or permanent resident and will be asked to provide your SIN or proof of permanent residency.
The property must also qualify and be located in BC, used as your principal residence, be 0.5 hectares or smaller, and have a fair market value of $750,000 or less. Therefore, the newly built home exemption does not apply to investment properties not being used as your primary residence.
A newly built home most notably includes a presale property or new build but does include other types of homes. For a full list of newly built homes, check out the list here: What is a newly built home?
Foreign Buyer Tax (Additional Property Transfer Tax)
The foreign buyer’s tax is an ADDITIONAL property transfer tax. This means that if you are considered to be a foreign buyer or foreign national purchasing a property in one of the applicable areas then you will be subject to both the property transfer tax and the foreign buyer’s tax.
The tax amount is 20% of the fair market value of your proportionate share:
- Capital Regional District
- Fraser Valley Regional District
- Metro Vancouver Regional District
- Regional District of Central Okanagan
- Regional District of Nanaimo
The additional property transfer tax doesn’t apply to properties located on Tsawwassen First Nation lands.
Foreign buyer’s are not able to qualify for exemptions previously listed in the property transfer tax section (FTHB exemption & newly built home exemption); however, there are some cases where an exemption or refund for the tax may apply.
Foreign Buyer Tax Exemptions
Foreign Buyer’s Tax Refund for New PRs and Canadian Citizens
You may be eligible for a refund if you became a permanent resident or Canadian citizen within one year of the date the property transfer was registered with the Land Title Office.
BC Nominee Program Foreign Buyer’s Tax Exemption
One exemption to the foreign buyer’s tax is the BC Nominee Program. To qualify for the BC Nominee Program and this exemption the following must be satisfied:
- You must be a confirmed B.C. Provincial Nominee when the property transfer is registered with the Land Title Office
- The property must be used as your principal residence
- The property transfer must be made to an individual
You may claim this exemption only once. If you purchase another property, you must pay the additional property transfer tax. Qualifications for every exemption claimed are reviewed.
To claim the exemption, your legal professional must send a copy of your B.C. Provincial Nominee confirmation letter together with the Property Transfer Tax Return and the Additional Property Transfer Tax Return (FIN 532) (PDF).
GST (Goods and Services Tax)
GST is the responsibility of the buyer and calculated as an additional 5% of the purchase price that is payable at the time of completion.
This does not apply to resale properties, and is most notably applicable to properties that are newly constructed, such as a presale highrise condo sold by a developer, or an owner builder home. (usually detached)
GST New Home Rebate
There are 2 types of GST rebates for new homes:
- GST New Home Rebate
- GST New Residential Rental Rebate
Both are calculated the same and have the same purchase price restrictions.
A general rebate for homes that are under $350,000 that a buyer intends on living is an his/her permanent residence may apply to you. The rebate is 36% of the GST (therefore, 36% of the 5% GST) is the highest rebate that can be issued for new homes.
Property purchases between $350,000 and $450,000 have partial rebates at a much lower amount, and homes over $450,000 receive no GST New Home Rebate at all.
For more information and calculations on the rebate, check out: GST New Home Rebate Calculations
CRA Non-resident withholding tax
The Income Tax Act (“ITA”) of Canada generally requires the NR seller to notify CRA either before they dispose of the property or within 10 days of disposition. Once CRA has received the related forms and an acceptable security to cover the taxes payable that may result from the sale (generally 25% of the net capital gain), CRA will issue a Certificate of Compliance to the NR seller and their solicitor. A copy of the certificate will also be sent to the buyer.
If you are considered a non-resident by the Income Tax Act, then you’ll want to discuss with your accountant as to how to proceed with the sale of your property.
It’s important to know the cost of purchasing a home from the very beginning. Having a realtor on your side means you have someone that knows the ins and outs of the real estate process that can help estimate costs.
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