Additional Property Transfer Tax for Foreign Entities & Taxable Trustees
In addition to the property transfer tax, if you are a foreign national, foreign corporation or taxable trustee, you must pay the additional property transfer tax on your proportionate share of a residential property transfer if the property is within specified areas of B.C.
Your proportionate share is the percentage of interest that you are registering on title with the Land Title Office. For example, if you are a foreign entity (foreign national or foreign corporation) acquiring a 70% interest in a property, you pay the additional property transfer tax on 70% acquired interest.
You or your legal professional must also file the Additional Property Transfer Tax Return (FIN 532) (PDF) with the Property Transfer Tax Return, even if you or the property transfer qualifies for an exemption.
All additional property transfer tax returns will be reviewed and verified. Willful tax avoidance may be subject to penalties.
Tax Amount and Specified B.C. Areas
If the property transfer is registered on or before February 20, 2018 and is within the Metro Vancouver Regional District, the tax amount is 15% of the fair market value of your proportionate share.
If the property transfer is registered on or after February 21, 2018 and is within the following areas, the tax amount is 20% of the fair market value of your proportionate share:
- Capital Regional District
- Fraser Valley Regional District
- Metro Vancouver 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 you don’t have to pay the additional property transfer tax:
You don’t have to pay the additional property transfer tax if the registration occurs before or on May 18, 2018 and the property transfer is subject to a written agreement dated on or before February 20, 2018. Otherwise you will have to pay the additional property transfer tax.
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.
You don’t have to pay the additional property transfer tax and your property can be registered at any time if:
The property transfer is subject to a court order dated on or before February 20, 2018
The property transfer is subject to an Order Nisi of Foreclosure dated on or before February 20, 2018
The property transfer is subject to a separation agreement which was signed on or before February 20, 2018
The property transfer is 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
The property transfer is to a surviving joint tenant when the death of the deceased occurred on or before February 20, 2018
Tax on Residential Portion of Property
The additional property transfer tax applies on only the residential portion of a property located in the specified areas of B.C. There are three types of properties where this may occur:
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.
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.
There are two exemptions to the additional property transfer tax:
Generally, if you are exempt from property transfer tax, you are also exempt from the additional property transfer tax.
The exemption doesn’t apply to the additional property transfer tax in the following situations:
- A transfer resulting from an amalgamation
- A transfer to a surviving joint tenant
- A transfer where the transferee is or becomes a trustee in relation to the property, even if the trust does not change
The additional property transfer tax doesn’t apply to registration of trusts that are mutual fund trusts, real estate investment trusts or specified investment flow-through trusts.
B.C. Provincial Nominee
To qualify for this exemption:
- You must be a confirmed B.C. Provincial Nominee when the property transfer is registered with the Land Title Office
- The property must be used as your principal residence
- The property transfer must be made to an individual
You may claim this exemption only once. If you purchase another property, you must pay the additional property transfer tax. Qualifications for every exemption claimed are reviewed.
To claim the exemption, your legal professional must send a copy of your B.C. Provincial Nominee confirmation letter together with the Property Transfer Tax Return and the Additional Property Transfer Tax Return (FIN 532) (PDF).
Note that a B.C. Provincial Nominee Candidate in the entrepreneurial immigration stream to permanent residency is not the same as a Confirmed BC Provincial Nominee. A nominee candidate has to pay the additional transfer tax.
Clearance Certificate Information (Including Assignments)
There are no restrictions on non-residents purchasing property in British Columbia. There is no citizenship requirement to own land in B.C. There are restrictions on how much time may be spent in B.C. each year as a non-resident property owner. There are also income tax considerations to be aware of when a non-resident rents out a property or sells a property in British Columbia.
Non-residents who rent out a property must, by law, remit 25% of their monthly revenue to Revenue Canada in anticipation of filing a Canadian Income Tax Return on their rental 'business' by the end of the next tax year. Timely filing of the required form confirming a net loss on the rental investment may preclude the requirement for the 25% remittance.
When a non-resident owner sells Canadian property, Canadian law requires a 25% holdback of the proceeds of the sale pending filing of a Canadian Income Tax return by the end of the next tax year calculating Canadian tax owed on any Capital Gain. Alternatively, the owner may obtain a 'Clearance Certificate' that may be applied for in advance of the sale. This Certificate may reduce the holdback to a percentage of the capital gain instead.
There is a tax treaty in effect between Canada and many countries, including the U.S., which allows a credit against the tax owed in Canada in the amount of what tax has been paid in the treaty country on any capital gain. Numerous countries have signed tax conventions with Canada. For details on how this may affect your status with regards to income taxation, please consult with your tax accountant.
A withholding tax is imposed on the GROSS selling price of a Canadian real estate property sold by a non-resident. Normally, the vendor applies for a clearance certificate (T2062) to reduce the non-resident withholding tax.
Caution: Regulations change and exchange rates fluctuate on a regular basis. This information is provided as a guideline only. For details on how any of this information may affect your taxation or legal status, please consult with your tax adviser or nearest immigration center.
Lam Lo Nishio, Chartered Accountants:
We have a significant number of non-resident clients who have invested in real estate in British Columbia. Accordingly, we have developed a high level of expertise in dealing with all the issues which arise from such an investment and we want to share this expertise to the benefit of your clients. We are committed to serving you and your clients who have invested in BC.
Some of the planning ideas which we would be pleased to discuss before the deal closes are:
If you have suggestions as to what you and your clients would like to see in our pamphlets and on our web site, please let me know and we will do our best to add such information. If you have suggestions regarding how we can better serve you and your clients, please let us know.
It may interest you to know how we strive to differentiate ourselves from other accountants:
Thank you and warmest regards,
Don T. Nishio, Ltd.
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