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On Tuesday, February 20th, the NDP Government in British Columbia released its BC Budget for 2018 with tax measures that directly affect the Real Estate Market. We've listed some of the key highlights from the budget below.
Property Transfer Tax (PPT)
- Currently the PPT on acquiring a registered interest in land and improvements is calculated at 1% on the first $200,000 of fair value; 2% on the portion of the fair value greater than $200,000 and up to and including $2,000,000; and 3% on the portion of fair value greater than $2,000,000.
- The BC budget proposes an extra 2% of property transfer tax on the portion of fair value exceeding $3,000,000.
- On a property with a fair value of $3,750,000, the extra PPT to be paid on registration would be $15,000 bringing the total PPT payable to $105,500.
- The Ministry of Finance has released new Form FIN 536 for the calculation of this increased PPT, which is effective February 21, 2018.
Additional Property Transfer Tax for Foreign Entities (APPT)
- In addition to the PPT noted above, foreign nationals, foreign corporations and taxable trustees (a foreign national or foreign corporation holding title in trust for beneficiaries or a Canadian citizen holding title in trust for beneficiaries who are foreign nationals or foreign corporations) must pay APPT on the registered transfer of property.
- Currently the APPT is calculated at 15% of the fair value and is applicable to properties located within the Greater Vancouver Regional District.
- Effective for properties registered after February 20, 2018, the APPT will be increased to 20% and the location of the property affected will be expanded to include the Capital Regional District, the Fraser Valley, the Central Okanagan, the Nanaimo Regional District, and Greater Vancouver Regional Districts.
- If the property is included in one of the newly included districts, there is transitional relief available if:
- There is a written agreement for the property transfer in place prior to February 21, 2018 and the property is registered before May 19, 2018; or
- The property transfer is the subject of a court order, foreclosure, written separation agreement dated before February 21, 2018; or
- The property transfer is from the personal representative of a deceased estate or to a survivor of a joint tenant where the death of the deceased occurred prior to February 21, 2018.
- The Ministry of Finance has released new Form FIN 532 for the calculation of this additional property transfer tax, which is effective February 21, 2018. Failure to pay the PPT tax as required can result in significant penalties being imposed.
School Tax on High-Valued Properties
- In addition to the changes to the property transfer tax on residential properties with an assessed value in excess of $3,000,000, the BC budget proposes an increase to the School Tax, included in annual Property Taxes, on residential properties in the province (detached homes, condominium or townhouses and most vacant land) in the amount of 0.2% on residential properties with an assessed value between $3,000,000 and $4,000,000 and 0.4% on residential properties with an assessed value of over $4,000,000.
- The additional School Tax goes into effect in 2019.
- A new speculation tax has been proposed to begin in the fall of 2018.
- The speculation tax is aimed at foreign and domestic real estate speculators who do not pay tax in British Columbia and those that leave homes vacant.
- The speculation tax will be eligible for non-refundable BC income tax credit, which will allow those who pay tax in BC to be tax neutral on the application of this new tax.
- The tax will be 0.5% of assessed value in 2018 rising to 2% of assessed value in 2019.
- Principal residences will be exempt, as will long-term rental properties.
Other Tax Measures
- The province of British Columbia will create a database for pre-sale condo assignments to ensure taxes are paid on any pre-sale flips.
- Additional information will be required regarding the beneficial ownership on PPT forms.
- The province of BC will build a registry of ownership that will be administered by the Land Titles office. The registry will be publicly available and shared with law enforcement.
- The province will be amending the Property Transfer Tax Act to increase limitation period for assessments to six years.
- The province of BC is examining the property tax treatment of ALR as it wants to ensure land held within the ALR is used for farming. The BC budget specifically mentioned that it didn’t want ALR used by investors or for large homes and as such is moving to change the treatment of residential property in the ALR.
Have a question regarding the 2018 British Columbia Provincial Budget, please contact us here
The above content is believed to be accurate as of the date of posting. Tax laws are complex and are subject to frequent changes. Professional advice should be sought before implementing any tax planning. Manning Elliott LLP cannot accept any liability for the tax consequences that may result from acting based on the information contained therein.