In British Columbia, anytime a property is purchased, or a party ‘gains an interest’ in a property that is registered with the Land Title Office- there is a requirement to pay Property Transfer Tax (PTT). The actual amount varies depending on the circumstances of the purchase or transfer, and in some cases, the purchase will also incur Goods and Services Tax (GST).
When Does GST Apply to a Property Sale?
Generally speaking, GST is only charged on the sale of new homes in British Colombia. This includes newly constructed properties, such as pre-sale condos. Conversely, any property that has already been lived in and used for residential purposes will be exempt from GST, as it would have been paid when the property was new.
The GST rate in 2020 remains unchanged in B.C., at 5% of the properties fair and assessable value. This is usually the sale price, as it is assumed that this price was determined by a fair and open market.
As with many closing costs, this 5% is in addition to the cost of the property. However, some sales contracts may include full sales taxes in the transaction, which can include the GST, so it’s always important to check with your lawyer or notary before completing the payments.
There are some special circumstances where GST may apply to renovated properties, but this is only if a significant portion (90% or more) of the property has been redeveloped.
Does GST Apply to Vacant Land Sales in British Columbia?
When it comes to the sale of bare land in B.C., a number of mitigating factors may affect whether GST will also be charged on the sale. Generally, these factors revolve around who is selling the property, and how it was used prior to the sale. This also applies to any ‘excess land’ that is sold or associated with an existing property, such as where land is subdivided.
For example, if a property is sold by a corporation or partnership, it will always be subject to GST. Whereas a land sale by a non-profit will usually fall under an exemption. Similarly, if the land was held for personal use, and is sold by an individual or trust, it is generally exempt from GST.
Moreover, if the vacant land was used for business purposes, or the land was sold in unison with a business, it would be subject to GST. Similarly, if the vacant block of land is subdivided into more than two pieces it is also subject to the tax.
Are There Any Rebates Available for GST?
There are rebates available in some circumstances, however, these depend on the sale price/fair market value of your property. The rebate is 36% of the GST paid, provided that it meets the following conditions:
The property must be used as the principal residence. That means any home purchased for the purpose of investment or future retirement, it would not qualify.
The full rebate amount only applies to properties that are $350,000 or less.
Partial rebates are available on properties up to $450,000, with no rebate offered on new properties costing more than $450k. The partial rebates operate on a sliding scale, and online calculators are available to see how much GST you may incur.
The same 36% rebate can apply to new homes purchased with the intention of making it available for rent. However, the property must meet the above conditions, as well as a number of additional requirements, such as a minimum lease term of 12 months.
Unsure if you need to pay GST on your property purchase? At the West Haven Group, our experienced team can assist with all facets of the home buying process. For more information or advice, reach out and connect with us.