On February 16, 2016, as part of the BC Government’s 2016 budget announcement, the Government introduced several changes to the property transfer tax regime in British Columbia.
As background, pursuant to the Property Transfer Tax Act [RSBC 1996] Chapter 378 (the “Act”), a property transfer tax (“PTT”) is payable by the transferee when certain interests in land in BC are registered in the Land Title Office, such as, for example, a transfer of a fee simple interest in land or a lease with a total term of more than 30 years. PTT is generally assessed on the fair market value (“FMV”) of the land and the improvements on the land on the date of registration. For an arms-length purchase and sale of land, the FMV is generally considered to be the same as the purchase price under the contract of purchase and sale.
Prior to February 17, 2016, PTT was assessed at the rate of 1% of the first 200,000 of the FMV and 2% of the FMV above $200,000. The Act includes various exemptions from the requirement to pay PTT.
Tax Rate
Effective February 17, 2016, the tax rate for the portion of the FMV of a property above $2,000,000 will be increased from 2% to 3%. This change represents a 50% increase in the tax rate applicable to the portion of FMV over $2,000,000.
Accordingly, PTT will be assessed at the following rate for transfers that are registered on or after February 17, 2016:
- 1% on the first $200,000 of the FMV;
- 2% on the portion of the FMV greater than $200,000 up to and including $2,000,000; and
- 3% on the portion of the FMV greater than $2,000,000.
New Home Exemption
The Government also announced a new exemption from PTT for newly built homes used as principal residences, effective February 17, 2016. For the purposes of this exemption, a newly built home includes, among other things, a house constructed and affixed on a parcel of vacant land, a house converted from an existing non-residential improvement (e.g. a warehouse conversion) and a new apartment in a newly built condominium building. This exemption is only available to individuals who are Canadian citizens or permanent residents. Where the home and the buyer both qualify for this exemption, homes with a FMV of up to $750,000 are fully exempt from PTT, and homes with a FMV of up to $800,000 are partially exempt from PTT. Certain other restrictions and qualifications apply to this exemption. For example, in order for the exemption to remain valid, the buyer must move into the home within 92 days after the date the property was registered at the Land title Office, and the buyer must continue to occupy the home as his or her principal residence for the remainder of the first year after the date of registration.
Disclosure of Information
The Government announced that the following changes will come into effect sometime during the Spring of 2016 (unless the transferee claims the New Home Exemption discussed above, in which case these requirements will apply immediately):
Individuals: An individual who registers a taxable transaction in the Land Title Office will be required to disclose whether he or she is a Canadian citizen or permanent resident of Canada, and to disclose his or her foreign citizenship if he or she is not a Canadian citizen or permanent resident of Canada.
Corporations: A corporation which registers a taxable transaction in the Land Title Office will be required to disclose whether each of its directors is a Canadian citizen or permanent resident of Canada, and to disclose the foreign citizenship of any director that is not a Canadian citizen or permanent resident of Canada.
Beneficial Owners: Every transferee will be required to disclose whether they are holding the transferred property as a bare trustee, and, if so, disclose the name, address and citizenship of the beneficiary of the bare trust. Prior to this change, a transferee was not required to disclose whether it was a bare trustee and, if so, the name of the beneficial owner. A detailed description of this requirement has not yet been released, so it is not clear whether any subsequent change in beneficial ownership of a property that does not also involve a change in registered ownership of the property (for example, where a buyer acquires the shares of a company that is a registered owner, as bare trustee) will need to be disclosed.
Currently, PTT is only payable with respect to registered transactions, so no PTT is payable on a transfer of beneficial ownership of a property if there is no change in registered ownership. However, certain other provinces assess tax equivalent to PTT, at varying rates, on a transfer of beneficial ownership of a property, and the foregoing change may be the first data-gathering step in that direction in British Columbia.