On July 25, 2016, the B.C. government announced that it is
implementing a new property transfer tax applicable to foreign
buyers of residential properties. Here are the top 5 things you
need to know about the new tax:
1. What properties are affected?
The new tax applies to purchases of residential properties in
the Greater Vancouver Regional District, which includes: Anmore,
Belcarra, Bowen Island, Burnaby, Coquitlam, Delta, Langley City and
Township, Lion's Bay, Maple Ridge, New Westminster, North
Vancouver City and District, Pitt Meadows, Port Coquitlam, Port
Moody, Richmond, Surrey, Vancouver, West Vancouver, White Rock and
Electoral Area A.
Residential properties located on Tsawwassen First Nation lands
are exempt, as are non-residential properties, wherever located.
For mixed-use properties, only the portion of the property that is
residential property will be subject to the new tax.
2. Who has to pay the new tax?
Like the current property transfer tax, the additional tax is
payable by the purchaser of a taxable property. The new tax applies
to "foreign entities", which include:
individuals who are neither Canadian
citizens nor permanent residents;
any corporation that is not
incorporated in Canada; and
corporations that are incorporated in
Canada but are controlled by a foreign national or other foreign
entity, unless listed on a Canadian stock exchange.
If a Canadian national or entity purchases a taxable property
together with a foreign entity, the new tax will only be payable on
the portion of the property acquired by the foreign entity.
However, it is important to note that each purchaser is jointly and
severally liable for the additional tax, even if the other
purchasers are Canadians or permanent residents.
The new tax also applies to trusts involved in taxable
transactions if a trustee or beneficiary of the trust is a foreign
national or other foreign entity. However, mutual fund trusts, real
estate investments trusts, and specified investment flow-through
trusts are exempt.
3. How much tax will be payable?
The additional property transfer tax rate is 15% of the fair
market value of property purchased by a foreign buyer. The new tax
is payable in addition to the current property transfer
tax of 1% on the portion of the fair market value under $200,000,
2% on the portion between $200,000 and $2,000,000, and 3% on any
amount over $2,000,000.
This means that on a property valued at $1.5 million, a foreign
buyer will pay the current property transfer tax in the amount of
$28,000.00, plus the new property transfer tax in the amount of
$225,000.00, for a total of $253,000.00.
4. When does the new tax come into effect?
The B.C. government has announced that the new tax will apply to
property transfers registered in the Land Title Office on or after
August 2, 2016. The new tax will apply even if the contract of
purchase and sale for the property was signed before August 2,
Foreign buyers who have entered into a purchase contract closing
on or after August 2, 2016 should make immediate arrangements to
ensure that sufficient funds are available on the closing date to
cover the additional property transfer tax. Failure to complete the
transaction due to insufficient funds may result in the loss of any
deposit paid to the seller and other potential damages.
5. Do the usual property transfer tax exemptions apply to the
No. Certain transfers of real property are generally exempt from
the current property transfer tax. These include: transfers between
close family members, transfers resulting from corporate
amalgamations, and transfers to surviving joint tenants. However,
the new 15% additional property transfer tax will apply to
these types of transfers. The new tax will also apply when a
foreign entity, including a foreign national, becomes a trustee of
an existing trust that holds real property. The absence of
traditional exemptions may have potentially costly implications on
estate planning and certain corporate transactions involving
foreign nationals and foreign entities.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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