TAXES Andréa Agnoloni
Taxes on Real Estate Properties
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n the last couple of years, real estate property has been at the centre of the attention of the national news. Increasing prices, affordability, house-flipping, contract assignments, money-laundering, foreign ownership, and vacancy taxes have been the main topics of the day. Despite all the arguments and opinions around the subject, one thing is certain; real estate property is also at the centre of the attention of national, provincial and local government when looking for a base to levy taxes.
buyer is entitled to a GST rebate up to a maximum of $6300. • If the price is between $350,000 and $450,000, the rebate is gradually reduced. • If the price is over $450,000, there is no rebate.
Owning real property in Canada can be a good investment and profitable in the long term but it is important to understand all the taxes a property may be subject to…
Owning real property in Canada can be a good investment and profitable in the long term but it is important to understand all the taxes to which a property may be subject, including transfer taxes, rental taxes, property taxes, vacancy taxes, and capital gains taxes over the length of time the property is held.
Property Transfer Taxes
Let’s take for example an individual buying a new property to be used as a principal residence. The following taxes will apply over the time the property is owned.
• 3 % on the market value greater than $2 million and if the property is residential, a further 2% on the portion of the market value greater than $3 million
Taxes at the Time of Purchase
Some exemptions apply if the property is the first home purchased in BC and the newly constructed property is used as a principal residence.
Goods and Services Tax (GST) Newly constructed properties in British Columbia are subject to GST at 5% of the purchase price, payable on completion day. • If the purchase price of the new home is up to $350,000, the
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TABLE OF CONTENTS
When a property is purchased, the buyer must pay the provincial transfer tax. The tax is applied at the following rates. • 1% on the first $200,000 • 2 % on the market value greater than $200,000 up to and including $2 million
To be eligible for the first-home exemption, the value of the property must be $500,000 or less; to qualify for the new-construction property exemption, the value must be $750,000 or less. BC Notaries Association
Taxes during the Time of Possession Property Taxes Municipalities levy annual property taxes based on the assessed property value that reflects the market value. Those taxes are levied to fund local programs and services such as police and fire protection, road construction and maintenance, garbage services, recreation and community centres, parks, libraries, hospitals, and schools. The municipalities determine the tax rate (mill rate) every year based on the budget requirements.
School Taxes School taxes are also calculated every year and are usually collected together with the property taxes. If the residential property located in British Columbia is valued at more than $3 million, an additional school tax is levied and calculated as follows. • 0 .2% on the value between $3 million and $4 million (up to $2000) • 0 .4% on the value over $4 million (an additional $4000 for every $1 million of value above the $4 million threshold)
Taxes at Time of Sale At the time the principal residence is sold, the owner must declare the sale of the property on the income tax return and is eligible to claim the principal residence exemption. The exemption applies for each year the property is designated as the principal residence. Volume 28 Number 2 Summer 2019
