Property Transfer Tax is a land registration tax. It must be paid when an application for a taxable transaction 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.
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. For example, the seller lists the property with a realtor or advertises it for sale. 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.
In most open market transactions, the purchase price is the fair market value, as long as the transfer is registered within a few months after the sales contract is signed. 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.
Generally BC Assessment property assessments reflect fair market value as at July 1 of the previous year. For example, assessed values for the 2011 tax year are based on what the property would have sold for in the open market as at July 1, 2010. This means that the assessed value may not reflect the current market value of your property at the date of registration. Because of this and the fact that 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.
There are other situations when the BC Assessment value does not reflect the current fair market value including when the land is classified as farm land by BC Assessment or there have been changes affecting fair market value since the BC Assessment value was determined i.e. trends in a local area, addition of services, partial/new construction or rezoning.
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.
The following are examples of common improvements to land that are included in the fair market value of the property: houses; manufactured homes or modular homes; garages; sheds or other outbuildings; paving, such as driveways; utilities, such as sewer; and timber.
You are required to pay Property Transfer Tax unless you qualify for an exemption. Without an exemption, the tax is 1% of the first $200,000 and 2% of the remainder of the fair market value of the property.
For more information on Property Transfer Tax, please contact us.
Information courtesy of the Government of British Columbia.