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Structure of real estate taxation in BC ---- GST/HST in New Home Sales

12/27/2014

While purchasing a new home in BC, there are many GST/HST issues that come into being. Confusion can arise as a result of the HST’s existence from July 1, 2010 to April 1, 2013.

On April 1, 2013 when the HST was discontinued, the BC government introduced the 2% Transition Tax for the purpose of offsetting the revenue losses through the PST’s return. This temporary transition tax applies to new homes that were at least 10% complete as of April 1, 2013, and will terminate on March 31, 2015.

A timeline will help illustrate how much tax one would have to pay when purchasing a new home:

. If a home was built and also possessed before April 1, 2013, the buyer would have paid 12% HST.

. If a home’s construction began before April 1, 2013, but the buyer takes possession between April 1, 2013 and March 31, 2015, the buyer would have to pay 5% GST and 2% Transition Tax.

. If a home‘s construction began after April 1, 2013, the buyer would have to pay 5% GST on new home construction and the builder would have to pay 7% PST on the building materials.

Instead of BC new housing rebates program, the temporary transition tax rebate program has come available to new home builders. The transition tax rebate can be calculated on the home’s degree of completion as of April 1, 2013. See the following table:


% Construction Completes          Transition Tax Rebate as a
         as of April 1, 2013                 % of fair market value

            Less than 10%                                          not applicable

            10% <= and <25%                                         1.5%

            25% <= and <50%                                         1.0%

            50% <= and <75%                                          0.5%

            75% <= and <90%                                          0.2%

            90% or greater                                               0.0%

As always, when dealing with GST/HST questions in regards to new home sales, prospective buyers should consult with their accountant, legal adviser or the Canada Revenue Agency office. For more information go to

http://www.bclaws.ca/EPLibraries/bclaws_new/document/ID/freeside/12031_01#section54

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Structure of real estate taxation in BC ---- Property Transfer Tax

12/20/2014

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The Property Transfer Tax (PTT) is calculated as 1% of the first $200.000 of the fair market value plus 2% of any remainder, paid by the purchaser or transferee of property.

Most of the time, the purchase price is equivalent to the fair market value. The PTT that a purchaser has to pay on the completion date is determined automatically by the purchase price. For instance, if the property's purchase price is $500,000, the tax is 1% of $200,000 ($2,000) plus 2% of the remaining $300,000 ($6,000) for a total tax of $8,000.

However, not everyone is responsible for paying the PTT upon the registration of the transfer. The first time home buyers, for example, are allowed to claim an exemption from PTT if they purchase certain residential properties.

A purchaser who is eligible for the PTT exemption if he or she is:

A Canadian citizen or a permanent resident;
Has never owned an interest in a principle residence anywhere in the world (not just in Canada);
Has never received a first time home buyers’ exemption or refund;
The land of property is not larger than 0.5 hectares (1.24 acres);
The property will be only used as the principle residence;
The property’s fair market value does not exceed $475,000, the current threshold.

The A proportional exemption is provided for an eligible purchaser if the property’s fair market value is between $475,000 and $500,000. The formula is as follow:

             Tax Payable = PTT x (500,000-fair market value) / 25,000

       Fair Market Value              Exemption Amount               Tax Payable

          $475,000                                $7,500.00                            $0.00

          $480,000                                $6,080.00                           $1,520.00

          $485,000                                $4,620.00                            $3,080.00

          $490,000                                $3,120.00                           $4,680.00

          $495,000                                $1,580.00                           $6,320.00

          $500,000                                $0.00                                   $8,000.00



Want to know more about “property transfer tax act”, go to http://www.bclaws.ca/Recon/document/ID/freeside/00_96378_01#section6

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Structure of real estate taxation in BC ---- Annual Property Tax

12/13/2014

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Just like taxes imposed on income, capital gain and business, there are several taxes that make up the real estate taxation system--- for example, annual property tax, property transfer tax, GST and PST, etc.

A property tax is a levy based on the assessment of property value and issued by a municipality. A home owner - who has registered in the Land Title office as at November 30th of the year in which the assessment roll is completed - is liable for the full payment.

We should be aware of the following dates on the annual assessment calendar:

July 1                   -              It’s the valuation date for assessment roll.

October 31       -              it’s when a property’s state and condition is established for assessment notice.   From July 1 to October 31, if the status of a property changes materially, the actual value of the property as of October 31 is the value which will be used for the assessment roll.

November 30 -              It’s when an ownership established. According to the Assessment Act, the assessor only uses the land title office records as of November 30. If a closing date of sale is later than November 30, the new owner will not be shown on the assessment roll, therefore he/she will not be liable for the subsequent year’s property tax.

December 31 -              It’s when assessment rolls must be completed and assessment notices must mail to registered owners.

January 31        -              It’s the last date for a registered owner to file a “Property Assessment Complaint” to the Property Assessment Review Panels, whom you must first appeal to.

March 31           -              It’s when Property Assessment Review Panels confirm and authenticate the assessment roll.

April 30              -              It’s the deadline for a registered owner, who is dissatisfied with the panel’s decision, to file an appeal to the Property Assessment Appeal Board, the second level of appeal for property assessment.

On the other hand, there are certain classes of properties are granted full or partial exemption from property tax basis on the different ownership, such as public libraries, public hospitals, churches, Indian reserve lands, non-profit housing for the elderly, and so on.

Please stay tune for other taxes on real property in my following post.

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What to Know in a Transaction of New Homes

12/7/2014

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According to a new study from BCREA, by 2041, the total population of BC is expected to grow by nearly 30%, which means there will be an additional 1.39 million people, 632,000 households residing in the province. From 2016, every year, a total of approximately 25,000 additional new houses are in demand. Therefore, it’s absolutely essential that we all increase our awareness of how to better facilitate new home transactions.

In the residential construction industry, there are two major categories of builders: residential builder (includes a developer and a general contractor), a person who is licensed by the Homeowner Protection Office (HPO), engages in, arranges for or manages all construction of a new home under building permits; and owner builder, an individual who is exempt from licensing, receive authorization from the HPO to build a dwelling unit for his own personal use.

What does a new home buyer need to know when encountering an owner-built home or a non-owner-built home? Only purchasing a new home built by a residential builder comes with a 2-5-10 home warranty insurance, the minimum coverage includes 2 years on labour and materials, 5 years on the building envelop, and 10 years on the structure of the home. For sure, this program is able to offer buyers the investment protection and also peace of mind.

On the contrary, an owner builder does not have to provide third-party warranty insurance for his new home. However, there are still many obligations that must be met. For instance, the owner can only build once in any 18-month period; after obtaining an occupancy permit, he has to first occupy his new home for at least one year; as to sell the new home on the open market, the owner builder should provide a potential buyer a copy of a Disclosure Notice obtained from HPO; if the age of new home is less than 10 years after first occupancy, the owner will be still personally liable for any defects in the labour, design and materials used in the home.

To view the HPO’s 2014 “Residential Construction Performance Guide”, visit the link http://www.winniewu.ca/faqs.html under “How the Updated Guide Protects New Homes”.

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Structure of real estate taxation in BC ---- GST/HST in New Home Sales

Structure of real estate taxation in BC ---- Property Transfer Tax

Structure of real estate taxation in BC ---- Annual Property Tax

What to Know in a Transaction of New Homes

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