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On February 18, 2020, the Finance Minister of British Columbia (BC), Carole James, released the 2020 BC budget (see our 2020 Provincial Budget Highlights here), announcing the province’s continuous effort in improving the affordability and availability of BC housing. Whether you are a new family looking to upgrade to your first house, or a new immigrant considering investing in an apartment to start your new life, you should be aware that the cost of purchasing a home is not only limited to the price on your purchase contract. The following is a list of common tax implications applicable to the purchase of a property in BC:
In this article we will cover the taxes you will have to pay upon the purchase of the property. Stay tuned for our next article to learn about the annual taxes you will pay to maintain your ownership.
Property transfer tax is a one-time tax charged by the BC government to legally transfer the title of a property. When you purchase a property, you are responsible for filing a property tax return and paying the tax balance, before ownership of the property can be transferred to you. The property tax returns are usually filed by your legal representatives.
Note: an example of tax estimates is included at the end of the article.*Applicable to residential properties purchased after February 21, 2018
In order to reduce or eliminate the amount of property taxes you are required to pay, there are various exemption programs are made available to qualifying properties or purchasers. Common exemptions include:
If you are a foreign national or purchasing a new property with a foreign corporation or foreign trust, and the property you are purchasing is located in one of the areas listed below, you should expect an additional 20% property transfer tax on top of the property tax we have covered in the section above.
You may be exempt from, or entitled to a refund of the foreign buyers’ tax under the following set of circumstances:
If you are purchasing a newly constructed home, you might be subject to the BC Goods and Services Tax (GST). Similar to GST charged on most of the other purchases you make in BC, the GST on new homes is based on 5% of the selling price. If you are buying a resale home from a previous owner, your purchase will not be subject to this tax.
If you purchased shares in a co-operative housing (co-op) complex as your primary place of residence, or have constructed your own home with a market value less than $450,000, you may be eligible for the GST/HST new housing rebate.
For illustration purposes, we have outlined a common example of taxes that must be paid upon purchasing property in BC as a foreign national:
You are a foreign national working temporarily in Vancouver, BC. You purchased a newly constructed home in Vancouver on January 1, 2020 at the selling price of $4.2M. You do not plan to immigrate to Canada within 2020.
Purchase Price: $ 4,200,000
Tax on purchase:
For more information about various exemption programs and tax planning or structuring opportunities, please get in touch with us directly so we can help align you with the right Smythe advisor to help you meet your personal and business needs.