Frequently Asked Questions
- The HST only applies to “new” residential housing: used (i.e., resale) residential housing is not subject to HST.
- BC will provide a rebate for new housing purchased as a primary residence to ensure that, on average, purchasers of new homes up to $525,000 do not pay any additional tax due to harmonization. That is, they will pay no more in provincial HST than is currently embedded as a PST in the price of a new home. The rebate is available whether the new housing is to be owner occupied or rented.
- The rebate will be 71.43% of the provincial portion of the HST, up to a maximum rebate of $26,250. Purchasers of eligible new homes above $525,000 will be eligible for a rebate of $26,250 (i.e. a rebate on the first $525,000 of value).
- The HST only applies to new housing, so the rebate is only available for new housing.
- The BC new housing rebate will be available for all types of housing currently eligible for the federal GST/HST new housing rebate and will be subject to the same eligibility conditions. Qualifying housing generally includes newly constructed and substantially renovated homes used as a primary place of residence by an individual (or qualifying relation of the individual).
- To support affordable rental housing in the province, BC will also provide a new rental housing rebate of 71.43% of the provincial portion of the HST, up to a maximum rebate of $26,250 per unit.
- The new rental housing rebate will be provided to landlords who construct or substantially renovate their own rental housing and, as a result, are required to self-assess and pay HST under the self-supply rules. The rebate will also be provided to landlords who purchase newly constructed or substantially renovated rental housing in BC and pay HST on the purchase.
- The new rental housing rebate will be available for all types of new or substantially renovated rental housing currently eligible for the federal GST/HST rebate for new residential rental properties, and will be subject to the same eligibility conditions.
- The new housing rebates will be administered by the Canada Revenue Agency.
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| NewHousingRebate.pdf | 17.93 KB |
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| 10ThingsBuyersAreLookingFor.pdf | 120.57 KB |
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| WhatToDoBeforeYouBuy.pdf | 122.04 KB |
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| MovingChecklist.pdf | 133.13 KB |
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| OpenHouseChecklist.pdf | 126.09 KB |
For any property purchase in British Columbia, a purchaser is required to retain the services of a lawyer or notary to perform the purchase conveyance.Here is a list of providers:
McEwan, Harrison & Co: 250-368-8211
Ghilarducci & Cromarty: 250-368-6455
Thompson LeRose & Brown: 250-368-3327
Protect your way of life In British Columbia, you will be required by the bank or financial institution that is providing your mortgage to have insurance in place on your new property as of the completion date. For strata properties, insurance on the building is the responsibility of the strata corporation and, therefore, is already looked after; the buyer is responsible for insurance on contents and significant finishing upgrades. For single family homes, you will need to contact an insurance broker and provide them with details on your property prior to completion date. Note that insurance for properties that remain unoccupied is more expensive to insure than those that are occupied. Sometimes it can be beneficial to have a tenant. Here is a list of providers:
RHC Insurance Brokers: 250-362-7337
Mortgage financing for all types of Red Mountain investments can be arranged quickly by phone or online through our affiliate mortgage broker. Conventional mortgages usually require a 25 per cent down payment. In some cases, high ratio financing requiring as little as five per cent down is available.
For most out-of-country buyers, 40 per cent down payment is required, but many of our clients have been approved for as little as 25 per cent down. First time buyers may be eligible for a property purchase tax exemption.
For more information please contact:
Raylene Walker
Mortgage Specialist
HLC Home Loans Canada
Legal Fees (Conveyance)
The legal fees and disbursements associated with a real estate purchase are about $1,000 Cdn, assuming a typical purchase conveyance and a conventional mortgage. Legal fees may be higher for out-of-country buyers or non-conventional financing situations.
Property Transfer Tax
The rate is one per cent on the first $200,000 of the purchase price and two per cent on the balance. Some buyers may qualify for an exemption on the property purchase tax if they meet the following criteria:
1. The buyer has never owned property;
2. The purchase price is less than $225,000;
3. The buyer is a British Columbia resident;
4. The buyer has resided in Canada for the past 12 months and;
5. 70 per cent or more of the purchase price is being mortgaged.
The Canadian Income Tax Act contains rules which are intended to ensure compliance by non-residents who dispose of taxable Canadian property. These rules potentially shift the vendor's tax burden to the purchaser by imposing a withholding obligation on the purchaser based on the gross purchase price payable for the taxable Canadian property. The non-resident vendor must then apply for a Clearance Certificate to reduce the withholdings and ultimately file an income tax return to obtain credit for any costs (legal fees, etc.) associated with the sale.
Generally, any person (including another non-resident) who is purchasing a taxable Canadian property from a non-resident is required to withhold 33 1/3% of the gross purchase price and remit this to the Canadian government in respect of the non-resident vendors tax liability. The vendor may apply for a Clearance Certificate in advance of the closing date, which would permit the purchaser's withholdings to be based upon 33 1/3% of the vendor's estimated capital gains (determined before commissions and other costs of sale).
If the sale of taxable Canadian property is not reported in advance of the transaction, the non-resident vendor is required to notify the Tax Department, by registered mail, within ten days after the date of sale. This notice will usually be made in the form of a Clearance Certificate application (form T2062). In these 'post-closing' Clearance Certificate applications, the purchaser withholds on closing 33 1/3% of the gross purchase price and then releases to the vendor any excess of the amount withheld over the 'Certificate Amount' (being one-third of the vendor's estimated gain before selling expenses). A six- to ten-week delay in processing Clearance Certificates is not unusual.
In computing the estimated capital gain on form T2062, outlays and expenses related to the sale, including real estate commissions and legal fees may not be claimed. These amounts may be claimed when the non-resident vendor files a Canadian income tax return for the calendar year that includes the disposition date. These filings generally result in a refund of tax to the non-resident vendors. Generally, the Canadian income tax return for an individual is due April 30th of the following year. Unlike the United States, extensions to file returns are not available. Late-filed returns are subject to penalties and interest on any amount unpaid by the filing deadline.
The disposition of Canadian real estate poses more significant income tax issues to a US resident. Unlike the United States, Canada imposes tax on the basis of residency, not citizenship. However, non-residents of Canada may be subject to income tax on incomes from employment exercised in Canada, incomes from businesses carried on in Canada, and gains realized on dispositions of 'taxable Canadian properties'. Canada also imposes tax on certain types of passive income (including renting, royalties, and interest) paid by Canadian residents to non-residents of Canada.
A US purchaser of Canadian real estate will eventually be subject to Canadian income tax on the disposition of direct or indirect interests in real estate that are 'taxable Canadian property'. Real property or real estate situated in Canada is the most common example of 'taxable Canadian property'. Shares of Canadian corporations or interests in resident or non-resident partnerships or trusts that derive most of their value from Canadian real estate will also be considered taxable Canadian property. Shares of US corporations deriving greater than 50% of their value from Canadian real estate are also considered to be taxable Canadian property.
Capital gains are subject to a preferred rate of taxation in Canada. A capital gain is determined by deducting from the proceeds of disposition, the taxpayer's ACB (tax cost) in the property, and any outlays or expenses made or incurred in connection with the sale. One-half of the capital gains (referred to as 'taxable capital gains') is included in the calculation of income for Canadian tax purposes. Assuming they had no other income subject to Canadian income tax, US-resident individuals would pay Canadian federal tax on taxable capital gains realized in 2004 at marginal rates ranging from 20.5% (on the portion of taxable capital gains below $30,000) and 43.7% (on the portion of the taxable capital gain exceeding $100,000). At top marginal rate, the effective rate of tax imposed by Canada on the capital gain would be 21.85% (43.7% times 1/2).
With some limitations, US residents should be able to deduct the Canadian income taxes as a credit against their US federal tax liability in respect of the gain realized on sale. The same may not hold true for any state taxes that may be payable by the US individual on the gain, as some states, such as California, do not grant foreign tax credit relief to their residents for the purposes of computing state income taxes.
British Columbia imposes a Property Transfer Tax ('PTT') on the purchaser of real property situated in the province. The PTT becomes payable upon application for registration of a taxable transaction at a land title office. The PTT is computed at the rate of 1% of the first $200,000 CDN of the fair market value of the transferred property and 2% of the remaining fair market value. The acquisition of 'real property' in British Columbia may also be subject to the 13% Harmonized Sales Tax ('HST'). 'Real property', generally, includes land, any permanent structures thereon, a mobile home (but not including travel trailers, motor homes, camping trailers, or other recreational vehicles), and floating homes. Generally, used residential units are exempt from the HST. Vacant land will generally be subject to HST regardless of the intended use of the land by the purchaser. US residents will be subject to Canadian income tax on any capital gains realized on the eventual disposition of the property. A purchaser of Canadian real estate should keep appropriate documentation to support the tax cost (adjusted cost base, or 'ACB') of the property for use in computing any capital gain or loss on the eventual disposition of the property. Any PTT or HST payable in respect of the acquisition will form part of the ACB of the property to the purchaser, as will as any legal expenses and/or commissions paid in respect of the acquisition. It should be noted that, when the vendor of the property is another non-resident of Canada, the purchaser, regardless of his residence, must ensure that specific withholding and compliance requirements are adhered to in order to prevent the purchaser from becoming liable for the vendor's Canadian tax liability in respect of the sale of the property to the purchaser. This is discussed in greater detail below.
The following comments are intended to assist US-resident individuals in assessing the Canadian tax consequences associated with acquiring real estate in British Columbia for recreational or personal use. The comments are of a general nature only and are not intended to constitute tax or estate planning advice to any particular purchaser of Canadian real estate. There are additional income and commodity tax issues related to real estate acquired for use in a business or for rent or lease. These issues are not considered next.
A large percentage of our Greater Trail Area home buyers and investors live around the world. A real estate purchase by a non-resident can be simple and stress-free by using the services of a Canadian accountant or lawyer specializing in British Columbia real estate.
Canadian income tax legislation requires non-residents to pay 25 per cent of gross rental income to Canadian taxation authorities as security for actual taxes due. Purchasers can frequently obtain an exemption from this requirement by formally filing a budget: property rental managers usually assist with this. It's important to file annual income tax returns in order to retain the exemption.
Non-resident corporations need to provide extra documentation to satisfy land registration requirements. For instance, if the corporation is going to carry on commercial activity (rent property on a nightly basis), then the corporation will have to be extra-provincially registered in B.C.
If it is a one-time purchase and the corporation does not do business in B.C., the corporation will only have to file a certificate of incorporation, certificate of good standing and affidavit of no commercial activity. Extra-provincial registration is more involved. Both procedures take time and completion dates should reflect this. Original documentation is required from the home jurisdiction's authority over corporations.
Our affiliate mortgage brokers are a valuable resource for non-residents investing in Greater Trail Area real estate. Visit Home Loans Canada or contact Raylene Walker.
The majority of tax-related issues relating to non-residents arise when a non-resident is selling a property.
Legal Fees (Conveyance) The legal fees and disbursements associated with a real estate purchase are about $1,000 Cdn, assuming a typical purchase conveyance and a conventional mortgage. Legal fees may be higher for out-of-country buyers or non-conventional financing situations. Property Transfer Tax The rate is one per cent on the first $200,000 of the purchase price and two per cent on the balance. Some buyers may qualify for an exemption on the property purchase tax if they meet the following criteria: 1. The buyer has never owned property; 2. The purchase price is less than $225,000; 3. The buyer is a British Columbia resident; 4. The buyer has resided in Canada for the past 12 months and; 5. 70 per cent or more of the purchase price is being mortgaged. HST- Harmonized Sales Tax - A HST of 13% as of July 1, 2010 applies to the purchase of a new property. If you plan to continue nightly rentals, you have the option of becoming a GST registrant and deferring applicable GST fees. All buyers and sellers should review HST issues with their lawyer or accountant. Survey Fees If required by the bank or financial institution, the cost is about $300-$500 Cdn. Building Inspection Fees If desired by the buyer as a condition to the contract, the fee is approximately $300-$500 Cdn. Appraisal Fees This fee is usually paid by your bank or financial institution, but if not included, the cost is $300-$500 Cdn.
On June 23, 2008, new federal money laundering and anti-terrorist financing regulations came into effect that require real estate agents and brokers to collect personal identification information from buyers and sellers.
Additional information about this federal initiative, the federal legislation is avaiable at www.fintrac-canafe.gc.ca or call toll free 1-866-346-8722.
