Property Transfer Tax is a land registration tax payable when an application is made at any Land Title Office in British Columbia to register changes to a certificate of title. Property Transfer Tax is payable on the fair market value of the property being transferred.

Property Transfer Tax should not be confused with Property Tax, which is the amount paid on an annual basis for services received from local government.

When applying to register a taxable transaction at any Land Title Office in British Columbia, the person who is:

• acquiring a registered interest in the property, or
• gaining an additional registered interest in the property, or
• becoming the registered holder of a lease, life estate, or
• right to purchase against the property is required to pay the tax unless they qualify for an exemption. This person is referred to as the transferee or purchaser

If the transferee fails to pay the tax, the Registrar of Land Titles may refuse to register the transaction. Payment may be made by cash, cheque or money order, payable to the Land Title and Survey Authority of British Columbia. Payment should be presented at the Land Title Office.

The tax rate is 1% on the first $200,000 of the fair market value of the property, plus 2% on the fair market value over $200,000.

For example, if the fair market value of the property is $150,000 the tax is 1% of $150,000 or $1,500.

If the property's fair market value is $250,000 the tax is 1% of $200,000 ($2,000) plus 2% of the remaining $50,000 ($1,000) for a total tax of $3,000.
 

Taxable transactions include, but are not limited to, registration of:

• a transfer of legal title (for example, you buy a home and register it in your name)
• a right to purchase (an agreement for sale)
• a lease or lease modification agreement
• a life estate
• a foreclosure
• a property transfer pursuant to a corporate reorganization
• an escheat, forfeiture or quit claim
• a Crown grant

Fair market value is the price that would be paid by a willing purchaser to a willing seller in the open market on the date of registration. An open market is where the property is offered for sale so that anyone likely to be interested in purchasing it may make an offer. Often for a residential property, this is done by listing with a realtor or by advertising in the press and putting out a "For Sale" sign. If your tax return is reviewed by this office, you may be asked to provide evidence of how you knew the property was for sale.

Usually, fair market value is the purchase price. In other instances, such as where no money changes hands or the transfer did not take place in the open market, the fair market value must be determined by other means, such as an independent appraisal or by reference to the most relevant BC Assessment value.

BC Assessment property assessments reflect fair market value as at July 1 of the previous year. For example, assessed values for the 2007 tax year are based on what the property would have sold for in the open market as at July 1, 2006. Because property markets can change rapidly, you may need a more recent valuation, such as an independent appraisal, of what the property is worth at the time of registration.

Under the Interpretation Act , land means any interest in land, including any right, title or estate in it of any tenure, with buildings and houses, unless there are words to exclude buildings and houses or to restrict the meaning. Because there is no limiting definition in the Property Transfer Tax Act, tax is payable on the fair market value of the land, plus all improvements on that land at the time of registration.

Accordingly, houses and other structures attached to the land are included in the fair market value. Improvements may include timber, paving and anything that add value to the land. Manufactured homes registered in, and not excluded from, the Manufactured Homes Registry are not included.

Transactions are taxable at fair market value regardless of the purchase price. A gift of property, for example, still requires a Property Transfer Tax return to be filed at a Land Title Office and the tax to be paid on what the property would have sold for on the open market.

Other types of "fee simple transfers" include a change from tenancy in common to joint tenancy, a transfer to a surviving joint tenant, and a transfer of property between a company and its shareholders.

If a registered 'fee simple' ownership of a property is held in joint tenancy, the tax applies to the portion of the interest in the property being transferred.

For example, Sue and Mike are former spouses and own a property as joint tenants. They wish to transfer Mike's interest in the property to Sally, with the result that Sue and Sally will now hold the registered fee simple ownership of the property as joint tenants.

For the purposes of the Property Transfer Tax Act, Sue's interest in the property has not changed as a result of the transfer. The application of the tax is determined based on the transfer of a 50% interest in the property from Mike to Sally. If Mike and Sally are related (such as father and daughter), the transfer of the 50% interest from Mike to Sally may qualify for exemption.

To ensure you, as a First Time Home Buyer applicant, you have met the mortgage and principal residency requirements of the exemption. They will send you a form letter at the end of the year after you register your property transfer at the Land Title Office. You need to take this letter to your financial institution or mortgage holder and have them complete the mortgage details, showing the outstanding balance as of the date shown.

Sometimes units in large condominium projects are offered for sale well in advance of completion of the building. The buyer enters into a written agreement to purchase the property at a certain price before the strata units are registered in the Land Titles Office, but title will not transfer until some time later when the unit is actually completed.

Most purchasers of pre-sold strata units will pay tax on the total consideration paid for the unit rather than on its fair market value as at the date of registration.

Total consideration is the total amount paid to acquire the property. This includes money paid for upgrades or additions, or any other premium paid for assignment of a written agreement.

If the transfer of a pre-sold strata unit is a non-arm's length transaction, but
the transferee is a related individual of the person who signed the contract, there is no change in the tax treatment and the pre-sold provisions still apply. "Related individual" is defined under the Act to include spouses or those "vertically related" to each other, such as a mother, father, grandmother, grandfather, child, mother-in-law, grandfather-in-law, etc. It does not include brothers and sisters.

If the parties are not considered related, the transferee must pay tax based on the total consideration that would have been paid for the unit if the transaction had been between arm's length parties in the open market. The administrator can determine this amount for any non-arm's length transfer.

An assignment of the right to purchase a pre-sold strata unit from the purchaser to their company is an example of a non-arm's length transaction.

Many lenders allow their clients the option of paying their property taxes along with their mortgage payment. Property Transfer Tax is a one-time tax which is payable when a change in ownership is registered at the Land Title Office. Property Tax is paid annually to your municipality and Property Transfer Tax is paid to the province.

 For up to date information on property purchase tax. http://www.rev.gov.bc.ca/rpt/ptt/ptt.htm