What is Property Transfer Tax?
Property Transfer Tax is a land registration tax payable when an application is made at any Land Title Office in British Columbia to register changes to a certificate of title. Property Transfer Tax is payable on the fair market value of the property being transferred. Property Transfer Tax should not be confused with Property Tax, which is the amount paid on an annual basis for services received from local government.
Who must pay the Tax?
When applying to register a taxable transaction at any Land Title Office in British Columbia, the person who is:
- acquiring a registered interest in the property, or
- gaining an additional registered interest in the property, or
- becoming the registered holder of a lease, life estate, or right to purchase against the property
is required to pay the tax unless they qualify for an exemption.
This person is referred to as the transferee or purchaser. If the transferee fails to pay the tax, the Registrar of Land Titles may refuse to register the transaction. Payment may be made by cash, cheque or money order, payable to the Land Title and Survey Authority of British Columbia. Payment should be presented at the Land Title Office.
What is the tax rate ?
The amount of tax you pay is based on the fair market value of the land and improvements (e.g. buildings) on the date of registration unless you purchase a pre-sold strata unit. The tax is charged at a rate of:
- 1% on the first $200,000,
- 2% on the portion of the fair market value greater than $200,000 and up to and including $2,000,000, and
- 3% on the portion of the fair market value greater than $2,000,000.
For example, if the fair market value of a property is $450,000, the tax paid is $7,000.
What transactions are taxable?
Taxable transactions include, but are not limited to, registration of:
- a transfer of legal title (for example, you buy a home and register it in your name)
- a right to purchase (an agreement for sale)
- a lease or lease modification agreement
- a life estate
- a foreclosure
- a property transfer pursuant to a corporate reorganization
- an escheat, forfeiture or quit claim
- a Crown grant
What is Fair Market Value?
Fair market value is the price that would be paid by a willing purchaser to a willing seller in the open market on the date of registration. An open market is where the property is offered for sale so that anyone likely to be interested in purchasing it may make an offer. For example, the seller lists the property with a realtor or advertises it for sale. If your tax return is reviewed by this office, you may be asked to provide evidence of how you knew the property was for sale.
In most open market transactions, the purchase price is the fair market value, as long as the transfer is registered within a few months after the sales contract is signed. In other instances, such as where no money changes hands or the transfer did not take place in the open market, the fair market value must be determined by other means, such as an independent appraisal or by reference to the most relevant BC Assessment value.
Generally the BC Assessment value is based on market conditions at July 1st of the previous year. For example, assessed values for the 2016 tax year are based on market values as of July 1, 2015. This means that the assessed value may not reflect the current market value of your property at the date of registration. Because of this and the fact that property markets can change rapidly, you may need a more recent valuation, such as an independent appraisal, of what the property is worth at the time of registration.
There are other situations when the BC Assessment value does not reflect the current fair market value. The following are examples of when the BC Assessment value is not acceptable and you may need an independent appraisal to support the fair market value.
Since the BC Assessment value was determined (July 1st of the previous year), there have been some changes that affect the fair market value, such as trends in a local area, addition of services, partial/new construction or rezoning.
The land is classified as a farm by BC Assessment.
The Interpretation Act defines land as any interest in land, including any right, title or estate or tenure, with all buildings and houses. This means, you pay PTT on the fair market value of the property, which includes land and improvements to the land. The following are examples of common improvements to land that are included in the fair market value of the property.
- manufactured homes or modular homes (registration at the Manufactured Home Registry no longer determines if you pay PTT),
- sheds or other outbuildings,
- paving, such as driveways,
- utilities, such as sewer, and timber.
What about transactions when no money changes hands?
Transactions are taxable at fair market value regardless of the purchase price. A gift of property, for example, still requires a Property Transfer Tax return to be filed at a Land Title Office and the tax to be paid on what the property would have sold for on the open market.
Other types of “fee simple transfers” include a change from tenancy in common to joint tenancy, a transfer to a surviving joint tenant, and a transfer of property between a company and its shareholders.
However, some transactions may be eligible for exemption from Property Transfer Tax.
What exemptions are there from Property Transfer Tax
In addition to the First Time Home Buyers’ Program (see below), there are a number of other exemptions from Property Transfer Tax. Some examples are the transfer of property between spouses in the breakdown of a marriage, or transfer of property to a registered charity.
How does tax apply to transfers between joint tenants?
If a registered ‘fee simple’ ownership of a property is held in joint tenancy, the tax applies to the portion of the interest in the property being transferred. For example, Mary and John are former spouses and own a property as joint tenants. They wish to transfer John’s interest in the property to Charles, with the result that Mary and Charles will now hold the registered fee simple ownership of the property as joint tenants. For the purposes of the Property Transfer Tax Act, Mary’s interest in the property has not changed as a result of the transfer. The application of the tax is determined based on the transfer of a 50% interest in the property from John to Charles. If John and Charles are related (such as father and son), the transfer of the 50% interest from John to Charles may qualify for
How does the tax apply to split transfers?
Property Transfer Tax applies to each registration of a transfer of land. One Land Title Office transfer form containing one certificate of title number is considered to be one taxable transaction.
Sometimes individuals and corporate taxpayers split the transfer of a property
to take advantage of the lower rate of tax provided for transfers with a fair market value under $200,000. However, if one certificate of title is registered, regardless of how many transferees are registered on the title, that transaction will be seen as one transaction for tax purposes.
Even if separate title numbers exist, there are three common situations where the transactions are combined and taxed as one:
- split transactions involving one transferee
- split transactions involving related individual transferees
- split transactions involving associated corporations
Who is a related individual under the Property Transfer Tax Act?
Under the Act related individuals are:
- A person’s spouse
- A person’s children, grandchildren, greatgrandchildren,
- A person’s parents, grandparents, greatgrandparents
- The spouse of a person’s child, grandchild or greatgrandchild
- The child, parent, grandparent or greatgrandparent of a person’s spouse.
Please note that:
The list excludes siblings. Siblings are not considered to be related individuals for property transfer tax purposes.
A person is not related to themselves. For example, most transfers of interest in property from one to oneself or oneself in trust are treated as taxable transaction for which property transfer tax is payable on the fair market value at the date of registration
of title. Not all transfers between related individuals qualify for property transfer tax exemptions.
Are transfers of title from an individual to his/her own corporation exempt from paying property transfer tax?
No. There is no exemption under the Act for the transfer of property from an individual to his/her own corporation or to the corporation of a related individual. This type of transfer is a taxable transaction for which tax is payable on the fair market value of the interest transferred as of the date of registration.
Example: Property is registered in the name of John. John transfers 50% interest to John Inc. (John’s incorporated corporation).
The registration of 50% interest at the Land Title Office is a taxable transaction for which tax is payable on the fair market value as of the date of registration.
Is the transfer of a family farm from an individual to his/her family farm corporation exempt from paying property transfer tax?
A transfer of a family farm from one individual to his/her family farm corporation might be exempt from property transfer tax if certain criteria are met.
Are transfers of title between related or associated corporations exempt from paying property transfer tax?
No. There is no exemption from property transfer tax for the transfer of property between related or associated corporations.
Please note that the transfers of property between related or associated corporations are different from transfers of title pursuant to amalgamations or wind-up of societies.
How are transfers of title to a corporation treated under the Property Transfer Tax Act?
Registration of title to property in the name of a corporation that is not a family farm corporation is exempt from property transfer tax, if the corporation transferee is one or more of the following:
- A corporation established under the University Foundations Act or Trinity Western University Foundation Act;
- A corporation established under the Library Foundation of British Columbia Act;
- A corporation established under the Cultural Foundation of British Columbia Act;
- A corporation or a committee established under the First Peoples’ Heritage, Language and Culture Act;
- A corporation listed under Schedule 1 of the Federal-Provincial Fiscal Arrangements and Federal Post-Secondary Education and Health Contributions Act (Canada)
- A registered charity as defined in section 248 of the Income Tax Act (Canada)
Are manufactured, mobile or modular homes subject to property transfer tax?
Determining whether or not a manufactured/mobile/modular home is taxable under the Property Transfer Tax Act depends on whether the home is considered a fixture (improvement) to the property or a chattel. In the past the Property Taxation Branch relied on registry in the manufactured home registry as indication the property was a chattel. Over the years the nature of these types of homes has changed and some being registered now are considered fixtures. If the home is considered a fixture rather than a chattel property transfer tax is paid.
The common law (i.e. 70 provincial court cases) has shown the complexity of this delineation, but over time, certain criteria for the determination of the degree of permanence or affixation to the land have been set and these include:
- The degree of affixation to the land
- The degree and extent of attachment to the municipal services (e.g. light, water…)
- The visible physical improvementsâ€”i.e. adds-on such as stairs, porch, deck
- The degree of permanence:
- Is it inhabitable?
- Does it offer a more permanent accommodation or is it used on a temporary basis?
- Does it still have its wheels or have they been removed or sold?
- How is it perceived by an objective potential purchaser and/or by “others”?
- Can it be moved off the property without causing damage to the foundation and/or home? (Damage here can also be interpreted as structural modifications to the home, i.e. splitting it in half).
In order to determine if the home is taxable, facts specific to the transferring property must be reviewed against the common law. If you require any further advice on whether or not the property you are registering is taxable please contact the Property Taxation Branch. Our contact details are here.
What is the First Time Home Buyers’ Program?
Introduced in 1994, the First Time Home Buyers’ Program is designed to help British Columbians purchase their first home. The program exempts qualified home buyers from paying Property Transfer Tax.
Why did I receive a letter one year after buying my first home?
If your home was purchased and registered on, or after, February 20, 2008, the ministry sends you a form letter one year after you bought the home asking you to confirm that the home is still your principal residence. This letter ensures that you meet the principal residency requirements of the exemption.
If your home was purchased and registered before February 20, 2008, the ministry sends you a form letter asking for details of your mortgage account(s). You need to have your financial institution or mortgage holder complete the mortgage details on the form letter, showing the outstanding balance on February 19, 2008. This is to ensure that you did not pay down your mortgage below the allowable limit before February 20, 2008. For more information please see, the Guide to the First Time Home Buyers’ Program
Why do you need my mortgage history?
For purchases registered on, or after, February 20, 2008, a mortgage history will no longer be required. However, if you registered the purchase of your home before February 20, 2008, your mortgage history is required to ensure you have met the requirements of the exemption by not paying down your mortgage by more than the allowable limits before February 20, 2008.
Can I still qualify for the First Time Home Buyers Exemption if I have previously owned a mobile home?
It depends. If you owned a mobile home and were registered on title to the land on which the mobile home was located and at any time you lived in the mobile home as your principal residence, then you would not qualify for the First Time Home Buyers exemption on a subsequent purchase. If you owned and lived in a mobile home which was located on a rental pad and you didn’t own the land then yes you may be eligible to claim the First Time Home Buyers exemption on a subsequent purchase.
What is meant by a “pre-sold” strata unit?
Sometimes units in large condominium projects are offered for sale well in advance of completion of the building. The buyer enters into a written agreement to purchase the property at a certain price before the strata units are registered in the Land Titles Office, but title will not transfer until some time later when the unit is actually completed.
Why is buying a pre-sold strata unit relevant to the paying of Property Transfer Tax?
Most purchasers of pre-sold strata units will pay tax on the total consideration paid for the unit rather than on its fair market value as at the date of registration.
What is total consideration for a pre-sold strata unit?
Total consideration is the total amount paid to acquire the property. This includes money paid for upgrades or additions, or any other premium paid for assignment of a written agreement.
What if I sign a contract to purchase a pre-sold strata unit, but then assign that right to someone else who takes title to the property?
If the transfer of a pre-sold strata unit is a non-arm’s length transaction, but the transferee is a related individual of the person who signed the contract, there is no change in the tax treatment and the pre-sold provisions still apply. “Related individual” is defined under the Act to include spouses or those “vertically related” to each other, such as a mother, father, grandmother, grandfather, child, mother-in-law, grandfather-in-law, etc. It does not include brothers and sisters.
If the parties are not considered related, the transferee must pay tax based on the total consideration that would have been paid for the unit if the transaction had been between arm’s length parties in the open market. The administrator can determine this amount for any non-arm’s length transfer.
An assignment of the right to purchase a pre-sold strata unit from the purchaser to their company is an example of a non-arm’s length transaction.
Could buying a pre-sold strata unit impact whether I qualify for the First Time Home Buyer’s Program?
The Property Transfer Tax Act sets out what property qualifies for this exemption and the value limits. The total consideration paid for the property will be used to determine if you qualify for the exemption.
Payment of Overdue Balance FAQs
Can I make instalment payments?
When agreed upon, short term payment arrangements are considered for a period of six months or less. For approval of payment proposals which are longer than six months, we require that you provide detailed financial information, and it will be necessary to secure the debt by registering a lien against your property. Interest continues to accrue on all unpaid balances.
Do you accept credit card payments?
No, we do not accept credit card payments.
Are you a private collection agency?
No, we are not a private collection agency. The Receivables Management Office is a branch of the Ministry of Finance that collects outstanding taxes owing to the province.
What do you mean by “Legal Action”?
The province has available remedies that it may use to collect overdue taxes under its various tax statutes. These remedies include:
- demands on bank accounts
- employers and third parties
- Certificates of Judgement
- Federal Government refund set-offs
- Writs of Seizure and Sale
Will legal actions have an effect on my (my company) credit rating?
This will depend on the collection action which has been undertaken in an attempt to collect the outstanding balance.
Why have I received a notice from the Land Title Office telling me a Judgement is registered on my property?
The Land Title Office is required to send you a notice informing you that a lien has been registered on your property. This notice gives you an opportunity to dispute the lien if you believe the lien has been filed in error. You may receive this notice after your account has been paid or reversed.
When will the lien on my property be removed?
We will remove all collection action including a property lien once you have paid the account in full or supplied all of the information we have requested that meets the criteria for the First Time Home Buyers’ exemption from Property Transfer Tax.
Where can I pay?
You can pay in person at any Service BC office, your bank, credit union or trust company or by mail using a money order, bank draft or certified cheque. For more details please see “How to pay your property transfer tax”
Haven’t I already paid this with my mortgage?
Many lenders allow their clients the option of paying their property taxes along with their mortgage payment. Property Transfer Tax is a one-time tax which is payable when a change in ownership is registered at the Land Title Office. Property Tax is paid annually to your municipality and Property Transfer Tax is paid to the province.