Our job as residential real estate lawyers is to make sure you have the knowledge and understanding of all the various fees you may incur before taking possession of your new home. This can include, legal fees, home inspections/appraisals, insurance, taxes, and any other closing costs that could arise.
While some of these expenses are fixed costs, many are variable and depend on the price of the home or the requirements of your bank to fund the mortgage.
An example of that is the property transfer tax. If you purchase a property in British Columbia, then you or your legal professional must file a property transfer tax return, and you must pay the property transfer tax.
It is worth keeping in mind that these taxes do not apply when you are selling a property.
What Is the Property Transfer Tax?
The property transfer tax in British Columbia is calculated based on the fair market value (FMV) of the property on the day it gets registered with the Land Title Office. There are minimal exceptions to paying the property transfer tax in BC, unless you qualify for an exemption or purchase a pre-sold strata unit.
Property transfer tax in British Columbia should not be confused with annual property taxes that are due on the property.
The annual property taxes are paid yearly to your municipal or rural tax office for each property you have registered interest in to fund services in your area.
What are the different property tax rates?
There are three rates to consider when thinking about your potential property transfer tax:
- general property transfer tax
- a further 2% charge on a property over $3,000,000, and
- additional property transfer tax.
The general property transfer tax applies to any taxable transactions, and the rate is as follows:
- 1% of the fair market value up to $200,000
- 2% of the fair market value greater than, and including $200,000, or
- 3% of fair market value on any property that is greater than $200,000
If the residential property you are purchasing is over $3,000,000, then a further 2% is required on top of the initial 3%. If the property is a mixed class, such as a mix of residential and commercial, you can pay the 2% tax on the residential portion of the property.
The additional property transfer tax applies if you are a foreign national, foreign corporation or taxable trustee. These rates are applied if the property you are purchasing is within one of the specified areas of British Columbia.
If you are a foreign buyer, you should be aware of the extra costs of buying property in B.C.
If you are a foreign buyer, the percentage of interest that you are registering with the Land Title Office is how your proportionate share is calculated. If you are acquiring 70% interest in a property, you will pay the additional property tax on 70% of the residential property’s fair market value.
For example, the current tax rate for foreign buyers is 20%. Any foreign buyer who was to buy a property in a specified B.C. area, such as West Vancouver or White Rock, would be required to pay an additional 20% of the fair market value based on your proportionate share.
Understanding costs, such as these kinds of taxes, is why a residential lawyer is important when acquiring or selling property so no cost should come as a surprise.
Contact us at realestate@papercliplaw.com or 604-973-0188.
