Provincial Response to Real Estate Prices
Since 2016, the provincial government has implemented several measures to combat rising real estate prices in metro-Vancouver and across the province. One of the most significant measures was the introduction of Bill 28, the Miscellaneous Statutes (Housing PriorityInitiatives) Amendment Act, 2016, also known as the B.C. Foreign Buyer Tax.
The primary purpose of this initiative was to reduce the amount of speculative real estate purchasing in B.C. by imposing an additional 15% transfer tax on all residential property purchased by foreign buyers in the metro-Vancouver area. However, the additional tax did little to discourage speculative foreign buyers in metro-Vancouver and across the province. Therefore, in February 2018, the provincial government increased the tax to 20% and expanded its reach to include the Capital Regional District, Fraser Valley, Central Okanagan, and the Nanaimo Regional District.
Does the Foreign Buyer Tax impact you?
The Foreign Buyer Tax is an additional tax applied to residential property transfers if the property is within one of the specified areas and the purchaser is not a Canadian citizen or permanent resident.
This additional tax is based on the proportionate share (i.e. percentage of interest) that is registered on Title with the Land Title Office by the following foreign entities.
- Foreign Nationals: a person who is not a Canadian citizen or permanent resident of Canada, including a stateless person.
- Foreign Corporations: a corporation that is not incorporated in Canada, or, a corporation that is incorporated in Canada but is controlled directly or indirectly by one or more foreign entities.
- Taxable Trustees: a trustee that is a foreign national or foreign corporation holding title in trust for a beneficiary, or a Canadian citizen holding title in trust for a beneficiary that is a foreign national or foreign corporation.
How does this impact foreign buyers?
If the property transfer is registered on or before February 20, 2018, and is within the metro-Vancouver Regional District, the taxable amount is 15% of the fair market value of the property, or the proportionate share that the foreign entity registers on Title.
If the property transfer is registered on or after February 21, 2018, and falls within the metro-Vancouver Regional District, Capital Regional District, Fraser Valley, Central Okanagan, or Nanaimo Regional District , the taxable amount is 20% of the fair market value of the property, or the proportionate share that the foreign entity registers on Title.
Residential vs. Commercial Property:
It is important to note that the Foreign Buyer Tax only applies to the residential portion of a property. Therefore, there are three types of properties on which the Foreign Buyer Tax applies:
- Property classified as residential (Class 1), where the tax is based on the fair market value of the entire property.
- Property classified as farm land that includes a residential improvement, where the tax is based on the value of the residential improvement plus 0.5 hectares of land.
- Property classified as commercial that includes a residential improvement, where the tax is based on the value of the residential improvement only.
Exemptions to the Foreign Buyer Tax:
Currently, there are two exemptions to the Foreign Buyer Tax:
- Generally, if you are exempt from property transfer tax, you are also exempt from the Foreign Buyer Tax.
- You may also be exempt from the Foreign Buyer Tax if you are a confirmed BC Provincial Nominee and meet certain criteria.
At Infinity Law, our lawyers can provide customized solutions to streamline compliance requirements and make sure that you take advantage of all possible current and future opportunities to reduce your real estate tax burden.
For more information on how we can help, please feel free to contact us though our website or at (250) 385-6004 / (888) 385-6004.