PropertyTransferTaxCourtesy of our good friends at Spagnuolo & Company Lawyers

Re: Property Transfer Tax Changes

 

Good morning everyone. By now you should have heard about the changes in the latest budget regarding the PTT.

Here is what we know.

1. There are no changes to the first time home buyer exemption limits;

2. All buyers (whether first time buyers or not) no longer pay PTT on purchases of NEW homes up to $750,000 in value; note the buyer must be a Canadian citizen or a permanent resident; there is a partial exemption for homes between $750,000.00 and $800,000.00;

3. PTT has changed so that there is now a 3% tax on amounts over $2,000,000.00. The 3% tax is only paid on the amount over $2,000,000.00, not the full price.

These are effective for deals closing today and going forward. We had one client close on a new home yesterday, and we believe they are out of luck. We also had one client that was to close today on a $4,000,000.00 purchase, but we moved the completion to yesterday to save the client $20,000.00 in PTT.

How is the government going to monitor the 1 year occupancy detail – As with the FTHB exemption, the Ministry will send a letter to the purchaser at the end of the year to confirm compliance.

If client is FTHB and purchase 550K used (not new) property, do they still pay PTT – yes, the $475K limit remains the same for FTHB first property. The FTHB Exemption values remain as they were.

Does this apply for contracts already in place and haven’t completed yet – The new amendments to the PTT Act deal only with the registration date and not the date of the contract.

For the New Housing Exemption of $750,000, is there any portion over $750,000 subject to 1%, or does it start at 2% on the portion over $750,000 – much like the FTHB exemption, a partial exemption is available  where the fmv is over $750,000 but less than $800,000. If the price is $800,000 or more, PTT is payable on the entire price. So if the price is $801,000, PTT is on the entire amount, not just the last $1,000.

Does this apply to commercial property purchases – yes it does! This is significant, as many commercial/industrial/office buildings are valued quite high. There is a 3% tax on the value over $2,000,000.00 on these buildings.

Is the exemption based on the pre-GST or net purchase price, or the purchase price including GST – we back out the GST from the price so that PTT is calculated on net price, which must be under $750,000 for the full exemption.

Can a Buyer qualify for the FTHB or the New Housing Exemption even if they move here from another province – for the FTHB exemption the Buyer must be either a Canadian citizen or permanent resident AND have lived in B.C. for 12 consecutive months immediately before the date they take ownership of the property, or they have filed at least 2 income tax returns as a B.C. resident in the last 6 years. For the New Housing Exemption the Buyer must be an individual and either a Canadian citizen or permanent resident. Note the difference, for the FTHB exemption there is a residency in B.C. requirement but not for the New Housing Exemption.

Does New Housing  PTT exemption apply to all real estate purchases whether they are principal residence or investment – these exemptions only apply to principal residence; full PTT applies to investment properties.

Do you know how this “equal to or smaller than.5 hectare” thing works with attached properties – the attached property must be equal to or less than .5 hectacre; this is not an issue with attached properties, at least not one we have ever come across before.

For property over $2,000,000, the PTT is first $200,000 for 1%, and the remaining is now 3% instead of 2% – It is 1% on the first $200,000, 2% on values over $200,000 up to $2,000,000, and 3% on any value over $2,000,000. The change is when the sale reaches $2,000,000 it will be 3% on the value over $2,000,000.

I have a realtor selling a newly constructed work/live townhouse in Surrey.  Retail space is on main floor.  Separate strata’s but sold as one unit.  Assuming buyer is living in property do you know if they will get the PPT waived even though main floor is retail space – if they are strata’s the PTT is based on individual units and their values. There will be an exemption for the townhouse that is principal residence, but not the retail portion.

Is the below calculation correct with the new rules that were put forth yesterday -yes

PTT amount x ($800,000 – purchase price)
$50,000 (the dif. between $800K and $750) = X

Then

PTT amount – x = partial exemption amount

13198 x ($800,000 – $759,900)
$50,000                                = $10,584.40 (savings)

$13,198 – $10,584.40 = $2,613.60 partial exemption amount.

Here’s a quick link to Govbc website calculator

http://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/understand .

Remember, there’s a lot more to mortgages than just great rates.

Feel comfortable calling me to discuss what may work best for you.

Mark Fidgett is a Vancouver mortgage broker and the driver behind

www.NotaPennyDown.com

Your Vancouver Mortgage Broker For Life 604-273-2002

www.notapennydown.com

P.S. Who’s the next person you know who wants to save thousands off their mortgage? Be sure to give me a call so we can help them! 604-273-2002