Property Transfer Tax

The amount of tax due depends on the fair market value of the property being transferred:

• If the fair market value is $200,000 or less, the tax is 1% of the fair market value.
• 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 fair market value of property is $500,000
 tax payable is: 1% of $200,000 = $2,000
 plus 2% of $300,000 = $6,000: total tax payable of $8,000

Property Transfer Tax is paid when an application for a taxable transaction is made at a Land Title Office in British Columbia. Taxable transactions include, but are not limited to, registration of:

• a transfer of title (purchase of a home)
• 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

Sections 14, 15, and 16 of the Property Transfer Tax Act describe the exemptions and partial exemptions available. There are over 40 possible exemptions and only the most common exemptions are briefly described below.

The transfer of a principal residence, recreational residence, or family farm qualifies for at least a partial exemption if the transferor and transferee are related individuals. For the purposes of determining if an exemption applies, the transferee must not only fall under the definition of “related individual” (includes only the following individuals: a spouse, parent, child, grandparent, grandchild, great-grandparent, great-grandchild, mother-in-law, father-in-law, grandmother-in-law, grandfather-in-law, great-grandmother-in-law, great-grandfather-in-law, daughter-in-law, son-in-law, granddaughter-in-law, grandson-in-law, great-granddaughter-in-law, and great-grandson-in-law; note that brothers, sisters, aunts, uncles, nieces, or nephews would not be included as related individuals), but must also be a citizen or permanent resident of Canada as defined in the Immigration and Refugee Protection Act. In addition, the transfer from a trust to a beneficiary qualifies for exemption if the settlor of the trust and the beneficiary are related individuals. The transfer of an estate of a decedent to a beneficiary also qualifies for exemption if the beneficiary and the decedent were related individuals.

An exemption from Property Transfer Tax is allowed if (1) the transfer is between related individuals, and (2) the property being transferred qualifies as the principal residence of the transferor or the transferee. The requirements for the principal residence exemptions under the Property Transfer Tax differs from those under the Income Tax (capital gains considerations) and should not be confused. Following are the qualifications for a principal residence under the Property Transfer Tax:

• The property must have been a parcel of land on which the transferor or the transferee usually resided and used as his or her home.
• The property must have been occupied by either the transferee or transferor as a principal residence for a period of at least six months immediately prior to the transfer being completed.
• There must be a house on the land; vacant land does not qualify as a principal residence.
• The property must not be larger than 0.5 hectare (1.24 acres or 53,763 square feet). For a larger property, an exemption may be claimed based on the proportion of land representing 0.5 hectares.
• All of the buildings on the land must be classified as residential by the British Columbia Assessment Authority. If the property has some improvements that are not classified as residential, only the fair market value of the buildings classified as residential are to be included in the exempt amount.

An exemption is allowed if (1) the transfer is between related individuals, and (2) the property qualifies as the recreational residence of the transferor.
Following are the qualifications for the recreational residence exemption.

• Before the exempt transaction, the transferor must have resided on the property on a seasonal basis for recreational purposes.
• The property must be classified as residential land by the British Columbia Assessment Authority.
• The fair market value of the property must not exceed $275,000. Where the fair market value of the property exceeds $275,000, the exemption is completely disallowed. There is no partial exemption.
• The area of the land must not exceed 5 hectares (12.35 acres). Where the area exceeds 5 hectares, the exemption is again completely disallowed. There is no partial exemption.

An exemption is allowed if (1) the transfer is between related individuals as described previously or between a family farm corporation and an individual who is either the sole shareholder of the corporation or who is a related individual to every shareholder, and (2) the property being transferred qualifies as a family farm. A family farm corporation is a corporation whose principal activity is farming farmland and whose shareholders are related individuals.
Following are the qualifications for the family farm exemption:

• The property must be classified as farmland by the British Columbia Assessment Authority.
• The property must be used, owned, and farmed by the same individual, by a family farm corporation, or by related individuals. If the farmland is leased to a tenant who is not related, the exemption is disallowed.
• The activities on the land must qualify as farming, e.g., a hobby farm is disqualified.

An exemption is allowed if:

• the transfer of property is pursuant to a written separation agreement or court order under the Family Relations Act
• the transfer is between spouses or former spouses
• a copy of the Court Order, Divorce Decree, or separation agreement is filed with a return.

An exemption is allowed if:

• the decedent was registered on title as a joint tenant
• the surviving joint tenant is the transferee.

The property passing to a surviving joint tenant by right of survivorship qualifies for exemption regardless of its use as a residence, revenue property, or vacant land.