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New BC Real Estate Taxes 2018


Blog by | March 13th, 2018


On February 20, 2018, the Provincial government introduced new changes to the
Property Transfer Tax and Foreign Entity Tax, which became effective as of February 21,
2018. The government also introduced a “speculator” tax, which will come into effect in
the fall of 2018.

Property Transfer Tax
The property transfer tax rate is now calculated as follows:
1% on the first $200,000,
2% on the portion of the fair market value greater than $200,000 and up
to and including $2,000,000,
3% on the portion of the fair market value greater than $2,000,000, and
if the property is residential, a further 2% on the portion of the fair
market value greater than $3,000,000.
If the property is classified as residential and farm, or is residential mixed class (such as
residential and commercial), you pay the further 2% tax on only the residential portion
of the property.

Sample calculation: If the fair market value of a property classified entirely as residential
is $4,500,000, the tax paid is $143,000.

1% on the first $200,000 = $2,000
2% on portion greater than $200,000 and up to and including $2,000,000
= $36,000 ($2,000,000 - $200,000 = $1,800,000 X 2% = $36,000)
3% on portion greater than $2,000,000 = $75,000 ($4,500,000 -
$2,000,000 = $2,500,000 X 3% = $75,000)
A further 2% on the portion greater than $3,000,000 = $30,000
($4,500,000 - $3,000,000 = $1,500,000 X 2% = $30,000)
$2,000 + $36,000 + $75,000 + $30,000 = $143,000

Foreign Entity Tax
For property transfers registered on or after February 21, 2018, the province has
increased the Foreign Entity Tax payable by foreign buyers on residential property from
15% to 20% (payable on the share being acquired by the foreign entity or taxable
trustee), and expanded the areas to which the tax applies from Greater Vancouver
Regional District to:

Capital Regional District (Victoria and Islands)
Fraser Valley Regional District
Regional District of Central Okanagan
Regional District of Nanaimo

The additional property transfer tax doesn’t apply to properties located on Tsawwassen
First Nation lands.

If the property is located in the Capital Regional District, Fraser Valley Regional District,
Regional District of Central Okanagan or Nanaimo Regional District and the property
transfer is registered on or after February 21, 2018, there are two instances where the
additional property transfer tax does not have to be paid.

1. The additional property tax does not have to be paid where the registration of
the transfer occurs on or before May 18, 2018 and the property transfer is
subject to a written agreement dated on or before February 20, 2018.

(Note:
If the written agreement is assigned to a foreign entity or taxable trustee on or
after February 21, 2018, the additional property transfer tax must be paid.)
2. The additional property transfer tax does not have to be paid where the
registration of the transfer occurs at any time, where 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
The additional property transfer tax applies on only the residential portion of a
property: There are three types of properties where this may occur:
1. Property classified as residential (Class 1) by BC Assessment. You pay the
additional tax based on the fair market value of the full property.
2. Property classified as farm land by BC Assessment that includes a residential
improvement, such as a building used as a farmer’s home. You pay the additional
tax on the value of the residential improvement plus 0.5 hectares of land (1.24
acres).
3. Property classified as commercial by BC Assessment that includes a residential
improvement (Class 1), such as a condo in a building with commercial space. You
pay the additional tax on the value of the residential improvement.

Speculator Tax
Commencing in the fall of 2018, non-residents who do not pay income tax in B.C. will be
subject to a speculator tax on residential property located in Metro Vancouver, Fraser
Valley, Capital Regional District, and Nanaimo, Kelowna and West Kelowna. Principal
residences and long-term rental properties will be exempt. The rate of the tax calculated
on market value will be 0.5 per cent in 2018 and two per cent in 2019.