Good advice.

Good advice.

Property Transfer Tax – Newly Built Home Exemption

DBM Law Blog

The tax one must always consider when purchasing or acquiring any real estate in BC is the Property Transfer Tax. For more information about what it is and how it is calculated, click on the following link:

Property Transfer Tax

A first time homebuyer may qualify for a complete or partial exemption of the property transfer tax. For more information on that exemption, click on the following link:

Property Transfer Tax for First Time Homebuyers

The provincial government fairly recently introduced a new exemption of the property transfer tax, called the Newly Built Home Exemption.

1. What are the Conditions To Qualify for the Newly Built Home Exemption

You qualify for an exemption of the property transfer tax under the Newly Built Home Exemption if:

a. you are an individual;

b. you are a Canadian Citizen or a Permanent Resident;

c. the property you are buying is located in BC;

d. the property will only be used as your principal residence;

e. the fair market value of the property is $750,000 or less (if the fair market value of the property is higher than $750,000.00 but less than $800,000.00, you qualify for a partial exemption); and

f. the land is 0.5 hectares (1.24 acres) or smaller

To ensure you continue to qualify for the tax exemption, you must do the following:

a. you must move into the property within 92 days of the date the property was registered; and

b. you must continue to occupy the property as your principal residence for the remainder of the first year.

When someone purchases a presale strata unit where the Completion Date is far into the future, the purchaser will generally pay property transfer tax on the purchase price on the contract plus any upgrades or additions. However, if the contract for the pre-sale strata unit is assigned, the assignee will pay property transfer tax based on the fair market value of the property at the time the property was registered at the Land Title Office.

2. What is Considered a Newly Built Home?

A newly built home includes:

a. a house constructed and affixed on a parcel of vacant land

b. a new apartment in a newly built condominium building

c. a manufactured home that is placed and affixed on a parcel of vacant land

d. an already constructed house that is removed from one parcel of land and affixed to another parcel of vacant land, as long as the house hasn’t been occupied since it was placed on the new parcel of vacant land

e. a house resulting from the division of an existing improvement affixed to a parcel of land that was also subdivided, as long as this house hasn’t been occupied since the subdivision of the parcel

f. a house converted from an existing improvement on the land. The previous improvement couldn’t have been used as residential (e.g. a warehouse converted into apartments).

3. What If I am Not a Canadian Citizen or a Permanent Resident?

If you are not a Canadian citizen or permanent resident at the time of registration, you will have to pay the property transfer tax. This tax is in addition to the Additional Property Transfer Tax. For more information, please click on the following link:

http://www.dbmrealestatelaw.com/bc-property-transfer-tax/

But if you become a Canadian citizen or permanent resident within 12 months of when the property is registered (and you had met all the other requirements at the time of registration), you may apply for a refund of the property transfer tax. To apply for a property transfer tax refund in this case, call 1-250-387-0555.

4. I am buying a presale condo. I will be the registered owner but I will not be living in it. My child will live in it. Can I qualify for the Newly Built Home Exemption?

No. To qualify, the property must only be used as the registered owner’s principal residence.

5. I am buying a presale condo with my child. My child will live in it, but I will not. What to do?

If one buyer qualifies under the Newly Built Home Exemption, only the percentage of interest that the qualified buyer has in the property is eligible for an exemption. If the other buyer does not qualify, the percentage of interest that the other buyer has in the property is subject to property transfer tax.

6. I am buying a Newly Built Home with my Spouse. We are buying a newly built home and the purchase price is $1,000,000.00. I will be the registered owner of an undivided 1/2 interest in this property, so I am really paying $500,000.00. I know that to qualify for an exemption (complete or partial) of the property transfer tax as a first time home buyer, the fair market value of the property must $800,000 or less. Do I qualify for the exemption?

NO. The Fair Market Value threshold as set by the provincial government is based on the fair market value of the entire property, not a person’s specific share in that property.

7. I am Buying several units in a newly constructed condo development. Which unit am I exempt of the Property Transfer Tax?

Maybe one of the units. It cannot be more than one of the units. But it can also be none of the units.

To qualify for the exemption, the property must only be used as your principal residence.

A principal residence is the usual place that a person makes their home. You can only have one principal residence.

If a person owns more than one home, they can’t just merely designate which one is their principal residence. Their principal residence is where they live and conduct their daily affairs, like paying bills and receiving mail, and it’s generally the residence used in government records for things like income tax, Medical Services Plan, driver’s licence and vehicle registration.

If you are not going to use any of the units as your principal residence (i.e, you may be renting them all out), then property transfer tax would be payable on all the units. If the unit that you are going to live in as your principal residence does not qualify for an exemption (i.e., the fair market value of the unit is $1,000,000.00, which is above the current $800,000.00 threshold), then property transfer tax would be payable on all the units.

As you can see, there are a lot of requirements to qualify for the Newly Built Home Exemption of the Property Transfer Tax. If you have any questions about this post, please contact Lewis Nguyen at lewis@dbmlaw.ca or 604-937-6373.

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