If you are a non-resident of Canada looking at purchasing property in the Regional District of Central Okanagan (“CORD”), the changes to Property Transfer Tax announced by the government of British Columbia on February 20, 2018 will be of particular importance.
As of February 21, 2018, the “additional property transfer tax” (also called the “foreign buyers tax”) in the amount of 20% of the fair market value of the property will be in effect in new regions of British Columbia including:
- Capital Regional District (CRD);
- Fraser Valley Regional District (FVRD);
- CORD; and
- Regional District of Nanaimo (NRD).
This tax is already in effect in Greater Vancouver Regional District (GVRD), although the rate has been increased.
The affected areas in the CORD include, without limitation, Kelowna, West Kelowna, Lake Country, Peachland. For a comprehensive list of affected areas, please visit: https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/understand/additional-property-transfer-tax/bc-areas
The following persons are affected by the above-noted changes:
- foreign national – a person who is not a Canadian citizen or permanent resident of Canada, including a stateless person;
- foreign corporation – a corporation that is (a) not incorporated in Canada, (b) is incorporated in Canada but is controlled in whole or in part by a foreign national or other foreign corporation, unless the shares of the corporation are listed on a Canadian stock exchange, or (c) is controlled directly or indirectly by a foreign entity (as defined in the Income Tax Act of Canada); and
- taxable trustee – a trustee that is a foreign national or foreign corporation holding title in trust for beneficiaries. The taxable trustee can also be a Canadian citizen holding title in trust for beneficiaries who are foreign nationals or foreign corporations.
Please note that buyers will not have to pay the additional property transfer tax if:
- There is a written agreement in place on or before February 20, 2018 provided that the registration takes place on or before May 18, 2018. Please note that if the written agreement is assigned to a foreign entity or taxable trustee on or after February 21, 2018, the additional property transfer tax will be payable; or
- The property transfer is (a) subject to a court order dated on or before February 20, 2018, (b) subject to an Order Nisi of Foreclosure dated on or before February 20, 2018, (c) subject to a separation agreement which was signed on or before February 20, 2018, (d) from the personal representative of a deceased’s estate to the beneficiary and the death of the deceased occurred on or before February 20, 2018, or (e) to a surviving joint tenant when the death of the deceased occurred on or before February 20, 2018. Please note that in these circumstances the registration date does not have to occur by a set deadline.
Please note that the above-noted transitional provisions do not apply to the Greater Vancouver Regional District where the increased rate (from 15% to 20%) is immediately applicable.
Moving forward, generally, a buyer who is exempt from property transfer tax is also exempt from the additional property transfer tax. The exemption does not apply to the additional property transfer tax if the transfer: (a) is resulting from an amalgamation, (b) is to a surviving joint tenant, or (c) where the transferee is or becomes a trustee in relation to the property, even if the trust does not change. A buyer who is a B.C. Provincial Nominee and who meets certain criteria may not have to pay the additional property transfer tax. For more information about the BC Provincial Nominee Program, please visit: https://www.welcomebc.ca/immigrate-to-b-c/b-c-provincial-nominee-program
In additional to the additional property transfer tax, the government of British Columbia also announced that property transfer tax on residential properties will be 5% (rather than 3%) on the portion of the purchase price in excess of $3,000,000. If the property is classified as residential and farm, or is residential mixed class (such as residential and commercial), the additional 2% of Property Transfer Tax will be payable only the residential portion of the property.This change is effective as of February 21, 2018.
If you have any questions regarding how the above-noted changes affect you (or your clients) from a legal perspective, please do not hesitate to reach out to one of our lawyers practicing in the area of real estate law. We would be happy to assist.
Author: Danielle (Dani) Brito
This information is general in nature only. You should consult a lawyer before acting on any of this information. This information should not be considered as legal advice. To learn more about your legal needs, please contact our office at (250)448-2637 or any of our lawyers practicing in the area of real estate law at the following:Una Gabie: firstname.lastname@example.org Jennette Vopicka: email@example.com Danielle (Dani) Brito: firstname.lastname@example.org Jane Otterstrom: email@example.com