Property Transfer Tax (“PTT”) and Goods and Services Tax (“GST”)

Taxes can be a very large part of the costs associated with buying real estate, especially with newly built or substantially renovated homes. The two most significant taxes are Property Transfer Tax and Goods and Services Tax. The other tax is Municipal Property Tax which will be discussed under the Closing Adjustment section.

PTT is a provincial tax applied against purchases of real estate in the province at the rate of 1% on the first $200,000 of the purchase price and 2% on the balance. The tax is submitted at the time of registration of the transfer in the land title office and the amount required must be provided to your lawyer or notary.

There is a full or partial exemption for “first time buyers”. There are number of criteria to qualify for the exemption and the purchase price determines whether or not it is a full or partial exemption. The main criteria are that buyers must be Canadian citizens or permanent residents of Canada; have resided in B.C. for a least 12 months or filed income tax returns as a resident of B.C. for 2 of the 6 taxation years immediately prior to registration of the transfer; and never previously owned a principal residence anywhere in the world. The full exemption is available for properties with a purchase price of $425,000 or less and a proportionate exemption is available for properties with a purchase price between $425,000 and $450,000. There is no exemption on properties with a purchase price greater than these thresholds. (For a comprehensive discussion see First Time Buyers’ Guide.)

GST is a federal tax and is payable on all new or substantially renovated homes by the first occupier of the property. GST is charged at the rate of 6% and may be included in the purchase price or added to it depending on the language of the contract of purchase and sale. Buyers should review the language carefully with their realtor as GST is a significant cost. Rebates are available for up to 36% of the GST if the buyer is going to use the property as a principal residence. The full 36% rebate of the GST is available for homes priced at $350,000 or less. For homes that cost more than $350,000, the rebate is phased out so that no rebate is available for homes valued at more than $450,000. (For a comprehensive discussion see GST New Housing Rebate Information.)