Property Transfer Tax Act Exemption
The Government of the Province of British Columbia today (February 16th, 2016), released it’s 2016 / Budget and Fiscal Plan. I have highlighted this issues which directly relate to real estate issues. Those budget matters, are summarized below.
Property Transfer Tax Act The Exemption for Newly Constructed Homes up to $750,000 in Value Introduced Effective February 17, 2016. An exemption from property transfer tax for newly constructed homes used as a principal residence is introduced. The buyer does not have to be a first-time owner of residential property. The full exemption is available for homes with a fair market value up to $750,000, with a partial exemption available for homes up to $800,000.
Property Transfer Tax Increased
Property Transfer Tax Increased to 3 Per Cent from 2 Per Cent on the Portion of Fair Market Value in Excess of $2 Million Effective February 17, 2016. The property transfer tax rate is increased to 3 per cent from 2 per cent on the portion of a property’s fair market value above $2 million. Rates of 1 per cent on the first $200,000 of a property’s fair market value and 2 per cent on the fair market value between $200,000 and $2 million will continue to apply.
Data on Citizenship and Bare Trusts Collected
The Property Transfer Tax Act is amended to require disclosure of citizenship, on registration of a taxable transaction, by individuals who are not Canadian citizens or permanent residents of Canada. Corporations will also be required to disclose, on registration of a taxable transaction, the citizenship of any director who is not a Canadian citizen or permanent resident of Canada. The amendments will also require the disclosure of the names, addresses, and citizenship information of settlors and beneficiaries of bare trusts. The new disclosure requirements will come into effect in spring 2016.
Home Owner Grant Act
Threshold for Home Owner Grant Phase-Out Increased As announced on January 5, 2016, the threshold for the phase-out of the home owner grant is increased to $1,200,000 from $1,100,000 for the 2016 tax year. For properties valued above the threshold, the grant is reduced by $5 for every $1,000 of assessed value in excess of the threshold.
Bare Trusts
There have also been questions about transfers involving the use of bare trusts, because subsequent transfers are accomplished through revisions to trust documents and share transfers rather than registrations in a land titles office, and as a result these subsequent transfers are not subject to property transfer tax. When the tax was first introduced, the decision was made to tax only registrations in a land title office, and that has remained the construct of the tax. However, in order to better understand the use of this structure, going forward the province will require transferees acting as bare trustees to declare information in relation to settlors and beneficiaries of a trust. For settlors and beneficiaries who are individuals, that will include names, addresses and citizenship. For settlors and beneficiaries which are corporations, that will include the name and address of each director, and their citizenship. Data collection will begin shortly after the amendments to the Property Transfer Tax Act are in place in order to ensure that the data collection is compliant with other provincial statutes and will allow lawyers and notaries who practice real estate conveyancing to prepare for the new information requirements. Data that is collected will be shared with the Canada Revenue Agency under the existing information exchange agreement between British Columbia and Canada. Previously, information on Canadian citizenship or permanent resident status has only been required in the Property Transfer Tax Act for the administration of certain exemptions such as that for related individuals or under the First Time Home Buyers’ Program.