Taxes for Real estate

In British Columbia (BC), Canada, the Goods and Services Tax (GST) applies to newly constructed or substantially renovated residential properties, including condominiums. However, GST generally does not apply to the resale of used residential properties. Here is a detailed explanation regarding GST when purchasing property in BC, including the specific situations you mentioned:

1. GST on New or Substantially Renovated Properties

• Newly Built Properties: When you purchase a newly built home or condominium, GST (currently at a rate of 5% in Canada) is typically applied to the purchase price.

• Substantially Renovated Properties: If a property has undergone significant renovations, making it comparable to a new home, GST may also apply.

GST Rebate for Buyers

• Primary Residence Rebate: If you are purchasing the property as your primary residence, you may qualify for the GST New Housing Rebate, which can reduce the amount of GST you pay.

  • For homes priced at $350,000 CAD or less, you may receive a rebate of up to $6,300 CAD.

  • For homes priced between $350,000 CAD and $450,000 CAD, the rebate amount gradually decreases.

  • Homes priced over $450,000 CAD are not eligible for the rebate.

• Rental Property Rebate: If the property is intended for investment or rental purposes, you may still qualify for a partial GST rebate, though the eligibility requirements are stricter.

2. GST on Used Properties

• Used Residential Properties: GST generally does not apply to the resale of used residential properties (including condominiums), as GST would have been applied when the property was first sold as a new home.

• Exceptions: If the previous owner never lived in the property (e.g., it was held as an investment or for resale), the property might still be classified as a "new home" for GST purposes, meaning GST may apply upon resale.

3. Purchasing a Condo the Previous Owner Never Lived In

• If the previous owner bought a newly constructed condo but never lived in it (e.g., it was kept as an investment or left vacant), it may still be considered a "new home" for GST purposes.

• In this scenario, GST may apply to your purchase, even if the previous owner already paid GST at the time of their purchase. This is because the property was never used as a primary residence and is still classified as a new home under GST regulations.

• The GST rate remains 5% of the purchase price.

If you intend to use the condo as your primary residence, you may be eligible to apply for the GST New Housing Rebate.

Property Transfer Tax, also known as Property Transfer Tax or Land Transfer Tax, is a fee you must pay when purchasing property in British Columbia (BC).

Property Transfer Tax Rates

The tax is calculated using a progressive tax rate based on the property's fair market value (FMV):

• 1% on the first $200,000 CAD of the property value.

• 2% on the portion of the property value between $200,001 and $2,000,000 CAD.

• 3% on the portion of the property value between $2,000,001 and $3,000,000 CAD.

• 5% on the portion of the property value above $3,000,000 CAD.

Example Calculation

For a property purchased at $1,500,000 CAD:

• First $200,000 CAD → 200,000 × 1% = $2,000 CAD

• Remaining $1,300,000 CAD → 1,300,000 × 2% = $26,000 CAD

Total Property Transfer Tax:
2,000 + 26,000 = 28,000 CAD

Who Needs to Pay Property Transfer Tax?

• All buyers purchasing property in BC, including local residents, foreign buyers, and businesses.

When to Pay?

• The Property Transfer Tax is typically paid at the time of property transfer.

• Usually, your lawyer or notary public will handle the payment as part of the closing process.

Exemptions from Property Transfer Tax

Certain situations may qualify for a full or partial exemption from the Property Transfer Tax, including:

• First-Time Home Buyers’ Program

• Family Property Transfers

First-Time Home Buyers’ Program

The First-Time Home Buyers’ Program is a tax relief program introduced by the BC government to help first-time buyers reduce their financial burden. Qualified applicants may receive a partial or full exemption from Property Transfer Tax.

Purpose:

• To make it easier for first-time home buyers to enter the real estate market.

Applicable Tax:

• Property Transfer Tax (PTT)

Exemption Amount:

• Based on the property's fair market value (FMV), applicants may qualify for a full or partial exemption.

Eligibility Requirements

To qualify for the First-Time Home Buyers’ Program, you must meet the following conditions:

1. Citizenship or Residency

• Be a Canadian citizen or permanent resident.

2. Residency Requirement

• Have lived in BC for at least one year before the purchase.

• Occupy the property as your principal residence within 92 days of the transfer date.

3. First-Time Home Buyer Status

• You must be a first-time home buyer, meaning you have never owned a property anywhere in the world.

• If purchasing with a spouse or common-law partner, they must also meet the first-time buyer requirement.

4. Property Requirements

• The property must be located in BC.

• It must be a residential property (e.g., detached house, condo, townhouse, or duplex).

• The fair market value must be $835,000 CAD or less (based on 2023 standards).

Exemption Amount Calculation

The amount of the exemption is based on the property’s fair market value:

Fair Market Value (CAD) Exemption Status

Starting from April 1, 2024, the full exemption threshold for newly built residential properties will increase from $750,000 CAD to $1,100,000 CAD in fair market value.

Partial Exemption:
Properties with a fair market value slightly above the threshold may still qualify for a partial exemption. The exemption will gradually phase out for properties valued up to $1,150,000 CAD. Beyond this amount, no exemption will apply for eligible buyers.

Applicable if the property is used as a primary residence.

Property Flipping Tax in BC

To combat speculation in the real estate market, the British Columbia (BC) government introduced the Property Flipping Tax (PFT) in 2025. This tax policy is designed to discourage short-term property sales for profit, promote market stability, and protect long-term housing needs.

What is the Property Flipping Tax?

The Property Flipping Tax applies to properties sold within two years of purchase, targeting short-term sales intended for profit. If you sell a property within this period, you may be required to pay the tax unless you qualify for specific exemptions.

Tax Rates and Calculation

• Tax Rate: 20% of the profit from the sale.

• Applicable Period: Applies to properties purchased on or after January 1, 2025, and sold within two years.

• Taxable Amount: Based on the difference between the selling price and the purchase price (i.e., the profit).

Tax Rate by Holding Period

• Less than 1 year (365 days) → 20% tax on the sale profit.

• 1 to 2 years (366 to 730 days) → Tax is applied on a sliding scale, decreasing over time. For example, if sold after 18 months, a 10% tax applies.

• Over 2 years → No Property Flipping Tax is applied.

Presale Assignments (Assignment Sales)

For presale assignments (where a buyer transfers the right to purchase a property before completion), a 20% tax applies regardless of how long the property was held.

Primary Residence Exemption

• If the property sold was your primary residence, you may qualify for an exemption of up to $20,000 CAD.

Exemptions

Not all short-term property sales will be subject to the Property Flipping Tax. Some exemptions apply in cases of:

• Life Events: Divorce, unemployment, illness, or death.

• Job Relocation: Moving due to a change in employment.

• Safety Concerns: The property is unsafe for living.

• New Construction or Renovations: Selling newly built or substantially renovated properties.

• First-Time Home Buyers: Eligible first-time buyers may qualify for an exemption.

Example Calculation

• Mr. Zhang purchased a property for $1,000,000 CAD on January 1, 2025.

• He sold it on June 1, 2026, for $1,200,000 CAD.

• Since he sold the property within two years and doesn't qualify for any exemptions, the tax applies.

Profit: 1,200,000 - 1,000,000 = $200,000 CAD Property Flipping Tax: 200,000 × 20% = $40,000 CAD

Mr. Zhang would need to pay $40,000 CAD in Property Flipping Tax to the BC government.

Purpose of the Policy

The main objectives of the Property Flipping Tax are:

• Prevent Speculation: Discouraging investors from driving up housing prices through short-term sales.

• Protect Housing Supply: Encouraging the use of properties for primary residence or long-term ownership.

• Generate Revenue: Providing funds for affordable housing projects and public services.

Key Considerations

• Tax Planning: If you intend to sell a property within two years, consider consulting with a tax advisor to assess whether you qualify for exemptions or can reduce your tax liability.

• Market Impact: This policy may reduce the number of short-term investors, potentially stabilizing property prices, but it could also affect market liquidity.

The Foreigner Buyer’s Additional Property Transfer Tax is an extra tax imposed in certain Canadian provinces on non-residents purchasing residential properties. The purpose of this tax is to reduce the impact of foreign buyers on the local real estate market and to help local residents purchase homes more easily. Here’s a detailed explanation with an example:

Details

Who is Subject to the Tax?

• Non-Canadian Citizens or Non-Permanent Residents: This includes individuals who are classified as foreign buyers.

• Foreign-Controlled Companies or Trusts: In some cases, companies or trusts controlled by foreign entities may also be subject to the tax.

Tax Rates by Province

The tax rate varies depending on the province:

• British Columbia (BC): 20% tax rate (Effective from October 25, 2022) applied in Greater Vancouver and other designated regions.

• Ontario (ON): 25% tax rate (Effective from October 25, 2022) applied in the Greater Golden Horseshoe Region, including Toronto and surrounding areas.

Calculation Basis

• The tax is calculated based on the higher of the property’s fair market value or the purchase price.

• This is an additional tax, applied on top of other property-related fees such as the Provincial Property Transfer Tax and potential federal taxes.

Exemptions

Foreign buyers may qualify for exemptions under certain circumstances, including:

• Permanent Residents: Individuals who have obtained Canadian permanent resident status.

• Protected Persons: Refugees or individuals with protected status.

• Spousal Purchases: Properties jointly purchased with a Canadian citizen or permanent resident spouse.

• Non-Residential Properties: Some agricultural or commercial properties may be exempt from the tax.

Refunds

In some cases, foreign buyers may be eligible for a tax refund, including:

• Permanent Residency: If the buyer becomes a permanent resident within a certain period after the purchase (within 2 years in BC or 4 years in Ontario).

• Primary Residence: In Ontario, buyers using the property as their primary residence and gaining permanent residency within 4 years may apply for a refund.

Example Calculation

A foreign buyer purchases a residential property in Greater Vancouver, BC for $1,000,000 CAD. Here's how the costs break down:

• Foreigner Buyer’s Tax (20%):
  1,000,000 × 20% = $200,000 CAD

• Property Transfer Tax (PTT):
  Estimated at $18,000 CAD (based on BC’s tax rates).

• Other Fees:
  (e.g., legal fees, home inspection) = $5,000 CAD

Total Cost

• Property Price: $1,000,000 CAD

• Foreigner Buyer’s Tax: $200,000 CAD

• Other Fees: $23,000 CAD (PTT + other expenses)

• Total: $1,223,000 CAD

Important Considerations

• Policy Changes: The foreign buyer’s tax may change, so it's advisable to consult a lawyer or real estate agent for the latest information.

• Provincial Variations: Each province has different tax rates and exemption rules, so ensure you’re aware of the specific regulations in the region where you’re purchasing a property.

The Speculation and Vacancy Tax (SVT) is an annual tax introduced by the British Columbia (BC) government to combat property speculation and address the issue of vacant homes. This policy aims to ensure greater housing availability and stabilize the real estate market. Here’s a detailed explanation:

Purpose

• Curb Speculation: Discourage speculative activities that drive up housing prices.

• Increase Rental Supply: Encourage property owners to rent out vacant properties, easing the housing shortage.

Applicable Areas

The tax is applied in specific regions of British Columbia, including:

• Metro Vancouver

• Fraser Valley

• Capital Regional District (including Victoria)

• Kelowna and West Kelowna

• Nanaimo

• Abbotsford

• Mission

• Chilliwack

Tax Rates

The tax rates vary based on the owner's residency status:

• Foreign Owners & Satellite Families: 2% of the property’s assessed value.

  • Foreign Owners: Non-Canadian citizens or non-permanent residents.

  • Satellite Families: Households where most income is earned and taxed outside Canada.

• Canadian Citizens or Permanent Residents (Non-Satellite Families): 0.5% of the assessed value.

• BC Residents: Usually exempt unless the property is left vacant, in which case a 0.5% tax applies.

Calculation Example

Example 1:

• Property Value: $1.5 million CAD

• Owner Status: Foreign Owner

• Tax Rate: 2%

• Tax Owed: 1,500,000 × 2% = $30,000 CAD

Example 2:

• Property Value: $1.5 million CAD

• Owner Status: Canadian Citizen or Permanent Resident (Non-Satellite Family)

• Tax Rate: 0.5%

• Tax Owed: 1,500,000 × 0.5% = $7,500 CAD

Exemptions

Owners may qualify for exemptions in the following cases:

• Primary Residence: The property serves as the owner’s main home.

• Rental Property: The property is rented out for at least 6 months per year, with each rental term being at least 30 days.

• Medical or Personal Reasons: If the owner cannot occupy the property due to medical issues or hospitalization.

• Major Renovations: Properties undergoing significant repairs or reconstruction.

• Legal Restrictions: If legal reasons prevent occupancy (e.g., court orders).

• Owner’s Death: Exemptions may apply in the event of the owner's passing.

• Newly Purchased Property: A first-year exemption may apply for new homebuyers.

Filing and Payment

• Declaration:

  • Every year, property owners receive a Declaration Notice from the BC government.

  • All owners must declare their status, even if they qualify for an exemption.

• Payment:

  • If no exemption applies, the tax must be paid by the specified deadline to avoid penalties and interest.

Example Scenario

A foreign owner has a property in Vancouver valued at $2 million CAD. The house remains vacant for over 6 months during the year.

• Tax Rate: 2%

• Tax Calculation: 2,000,000 × 2% = $40,000 CAD

However, if the owner rents the property for 6 months or more, they could claim an exemption and pay no tax.

Important Notes

• Late Filing or Payment: Failure to file a declaration or pay the tax on time may result in penalties and interest.

• Policy Updates: Tax rates and exemptions may change, so it is recommended to regularly check the official BC government website or consult a tax professional.

The Vacant Home Tax (VHT) is an annual tax implemented by the City of Vancouver to address the housing shortage by encouraging property owners to rent out vacant properties. Below is a detailed explanation of the tax:

Purpose

• Increase Housing Supply: Reduce the number of empty homes and add more properties to the rental market.

• Curb Speculation: Discourage real estate speculation and ensure better use of housing resources.

Scope of Application

• Location: The VHT applies to all residential properties within Vancouver.

• Property Types: It includes single-family homes, condos, townhouses, and other residential properties.

• Owner Type: The tax applies regardless of whether the owner is a local resident, from another Canadian province, or a foreign buyer.

Tax Rate

• As of 2023, the tax rate is 5% of the property’s assessed value.

Example:

• Property Value: $1.5 million CAD

• Tax Rate: 5%

• Tax Owed: 1,500,000 × 5% = $75,000 CAD

Definition of Vacant Property

A property is considered vacant if:

• It is not used as a primary residence by the owner or a tenant for more than 6 months in a calendar year.

• It is not rented out for long-term use.

• It is used exclusively for short-term rentals (e.g., Airbnb) without proper licensing.

Exemptions

Owners may qualify for exemptions under the following circumstances:

• Primary Residence: The property serves as the owner’s primary home.

• Long-term Rental: The property is rented out for at least 6 months in a year (with a minimum rental period of 30 days per stay).

• Medical or Personal Reasons: The owner is in a hospital or long-term care facility.

• Major Renovations: Significant construction or renovation is ongoing (with proper permits).

• Legal Restrictions: The property cannot be occupied due to legal orders (e.g., court rulings).

• Owner’s Death: Exemptions may apply in the event of the owner's passing.

• Newly Purchased Property: First-year owners may be eligible for an exemption.

Other exemption cases include:

• Properties with strata restrictions preventing rentals.

• Owners working temporarily in Vancouver with a primary residence elsewhere.

• Properties undergoing ownership transfer during the tax year.

Filing and Payment Process

• Declaration:

  • In February each year, property owners receive a declaration notice.

  • Owners must complete the declaration by the end of February through the City of Vancouver’s online portal at vancouver.ca/eht-declare.

  • Even if you qualify for an exemption, you must submit the declaration.

• Payment:

  • If the property is deemed vacant, owners must pay the tax by the deadline specified in the notice.

Steps to File a Declaration:

1. Visit the Vancouver Vacant Home Tax website.

2. Click on Submit Declaration.

3. Enter your Property ID and Access Code (found on your notice).

4. Provide contact information and confirm your property status.

5. Review and submit your declaration.

6. Receive a confirmation email upon submission.

Example Scenario

A homeowner in Vancouver has a property valued at $2 million CAD that remains vacant for over 6 months.

• Tax Rate: 5%

• Tax Calculation: 2,000,000 × 5% = $100,000 CAD

However, if the property was rented out for more than 6 months, the owner could qualify for an exemption and pay no tax.

Penalties for Non-Compliance

• Late Filing or Non-Declaration: Owners who fail to declare by the deadline may face fines ranging from 0.5% to 2% of the property’s assessed value.

• Providing False Information: Misreporting property status could result in additional fines of up to $10,000 CAD per day.

Difference Between VHT and SVT

• Vacant Home Tax (VHT):

  • Applied only within Vancouver.

  • 5% tax rate on vacant homes.

• Speculation and Vacancy Tax (SVT):

  • Applied across multiple regions in British Columbia.

  • Tax rates range from 0.5% to 2%.

If your property is located in Vancouver, you may need to declare and pay both taxes.

Underused Housing Tax (UHT)

To address the housing shortage, the Government of Canada introduced the Underused Housing Tax (UHT), a nationwide annual tax targeting residential properties that are underused or vacant. The tax has been in effect since January 1, 2022, and applies primarily to properties owned by foreign individuals or entities. The tax rate is 1% of the property’s assessed value.

Who Must File the UHT Declaration?

The following property owners are required to file a UHT Declaration:

1. Non-Canadian Citizens or Non-Permanent Residents

2. Trusts, Partnerships, or Funds (e.g., Real Estate Investment Trusts (REITs))

3. Foreign Corporations

4. Canadian Corporations that are not publicly traded (except for Cooperative Housing Corporations).

5. Companies Without Share Capital in Canada.

If you meet any of these criteria, you are required to submit a UHT Declaration for each residential property you own by April 30 of the following year.

Who Is Exempt from Filing? (Excluded Owners)

The following property owners do not need to file a UHT Declaration:

• Canadian Citizens or Permanent Residents

• Publicly Traded Canadian Companies

• Registered Charitable Organizations

• Cooperative Housing Corporations

• Indigenous Organizations or Indigenous Government-Owned Companies

If you fall under one of these categories, you are exempt from the filing requirement.

Who May Qualify for a Tax Exemption?

Even if you are required to file a declaration, you may be exempt from paying the UHT if your property meets one of the following conditions:

1. New Residential Property: Recently built homes or newly acquired properties.

2. Minor Foreign Ownership: Properties owned by a Canadian company where foreign ownership is less than 10%.

3. Exempt Partnerships: If all partners are Excluded Owners.

4. Exempt Trusts: If all beneficiaries of the trust are Excluded Owners.

5. Deceased Property Owner: Properties owned by an estate after the owner’s passing.

6. Seasonal Use or Accessibility: Homes that are not suitable for year-round living or are inaccessible due to seasonal conditions.

7. Disasters or Major Repairs: Properties that cannot be occupied due to natural disasters, hazardous conditions, or ongoing renovations.

8. Vacation Properties: Properties in designated areas that are used as vacation homes for at least 28 days per year by the owner or their spouse.

9. Primary Residence:

   • The property serves as the primary residence of the owner, their spouse, or their child studying in Canada.

10. Rental Property:

    • The property was rented for at least 180 days in the calendar year to a tenant paying fair market rent.

    • The property was occupied by a tenant who is a non-relative or paying rent at market rates.

11. Work or Study Residency:

    • The owner or their spouse has a valid Canadian work permit and resides in the property.

    • The owner’s spouse, parent, or child is a Canadian citizen or permanent resident and resides in the property.

When to Submit the UHT Declaration

• The UHT Declaration must be submitted by April 30 of the following calendar year.

• Along with the declaration, any applicable taxes must be paid in full by the deadline.

Penalties for Non-Compliance

Failure to file the UHT Declaration on time may result in significant fines:

• Individuals: A minimum penalty of $5,000 CAD per year.

• Corporations: A minimum penalty of $10,000 CAD per year.

Additional interest charges may also apply if the tax remains unpaid.

To avoid these penalties, ensure timely filing and accurate reporting.