By: Norman Chow
Under British Columbia law, the transferee of British Columbia real estate must pay Property Transfer Tax (“PTT”) at the time the transfer of title is registered in the Land Title Office.
The PTT is the aggregate of the following amounts:
- 1% of the first $200,000 of the fair market value of the property at the time of registration, plus
- 2% of the fair market value of the property at the time of registration that is between $200,000 and $2,000,000, plus
- 3% of the fair market value of the property at the time of registration in excess of $2,000,000.
The above PTT applies on equal footing to:
- all real estate lands and properties in British Columbia, whether newly built or used, and whether assessed by BC Assessment as residential, agricultural, commercial or other categories; and
- all transferees, whether they are resident or non-resident for income tax purposes, and whether they are or are not Canadian citizens or permanent residents.
The above PTT is subject to exemptions including transfers of principal residences between parents and children.
Additional PTT Effective August 2, 2016
On July 25, 2016, the British Columbia government announced that effective August 2, 2016, an additional PTT of 15% of the fair market value of the property at the time of registration must be paid if the transferee is a foreign national, foreign entity, or a taxable trustee and the property is assessed as residential by BC Assessment.
The additional PTT:
- does not apply to property which is assessed as business, agricultural or other categories by BC Assessment;
- applies to transfers between related parties if the transferee is a foreign national, a foreign corporation or a taxable trustee (in other words, the normal exemptions for PTT do not apply to foreign nationals); and
- applies to contracts entered into prior to August 2, 2016.
A foreign national is a transferee who is not a Canadian Citizen or permanent resident.
A foreign corporation is a corporation that is:
- not incorporated in Canada, or
- is incorporated in Canada but is controlled directly or indirectly in any manner by a foreign national or other foreign corporation (unless the shares of the corporate transferee are listed on a Canadian stock exchange).
A taxable trustee is a trustee of any trust of which a trustee is a foreign national or foreign corporation, or a trustee of any trust in which a foreign national or a foreign corporation holds a beneficial interest in the property.
Audit and Enforcement
The government has indicated that:
- all PTT transactions involving additional PTT are subject to audit; and
- the PTT department will examine transactions where Canadians hold property in trust for a foreign entity or are trustees where a beneficiary may be a foreign entity.
If a transfer of residential property is completed by one or a series of transactions with the result that there is a reduction, deferral or avoidance of the additional PTT that would be payable, then the PTT administrator has broad discretion to impose additional PTT on the transaction or series of transactions, unless the transaction or series of transactions was arranged primarily for bona fide purposes other than reducing, deferring or avoiding the additional PTT.
The audit period is six years from the date the transfer is registered at the Land Title Office.
Failure to pay the additional PTT as required or purposely completing the PTT return with incorrect or misleading information may result in a penalty of the unpaid tax plus interest and a fine of $200,000 for corporations or $100,000 for individuals and/or up to two years in prison. The penalties apply to anyone who participates in tax avoidance.