Property Transfer Tax Exemptions

Welcome back! My last “blog” introduced you to the Property Transfer Tax (“PTT”) which is payable in most instances where there is a change to a property title. There are, however, exemptions to the payment of tax.

Several common exemptions fall under the heading of “Family” exemptions. For instance, if a related individual transfers a principal residence or an interest in the principal residence to you, you “may” be exempt from paying the PTT. Those people considered to be a related individual are:
• your spouse, child, grandchild, great-grandchild, parents, grandparent or great-grandparent;
• the spouse of your child, grandchild or great-grandchild; and
• the child, parent, grandparent or great-grandparent of your spouse.

Child includes stepchild.

Your “spouse” is:
• a person who you are married to, or
• a person who you are living with in a marriage-like relationship, provided that you have been living in this arrangement for at least two years. The marriage-like relationship includes people of the same gender.

Interestingly enough, people who are not considered to be a related individual include:
• your sister, brother, uncle, aunt, niece or nephew.

Naturally, there are several criteria in order for a property to meet the definition of a principal residence. For instance, one criteria is that either you (being the transferee) or the person transferring the property to you (the transferor) have had to reside on the property and have used it as their home. The second criteria is that the improvements on the land (for example, the buildings) are set up to accommodate three families or less. In other words, you would not be able to claim an apartment building as your primary residence. The improvements on the land must be classified as “residential” by BC Assessment. Finally, the land must be 0.5 hectares, or 1.24 acres or smaller.

Of note is that a person is considered to have only one principal residence at a time.

In the event a principal residence is transferred to two or more people who are not all related individuals of the transferor, the exemption will only apply to the interest acquired to those people who are related individuals of the transferor. For example, your father transfers his principal residence jointly to you and your boyfriend, but you are not living in a marriage-like relationship. The exemption would only apply to the 50% interest acquired by you because your boyfriend is not considered to be a related individual.

There are different rules that apply in the event the property that is being transferred to a relative is considered “recreational”. In this case:
• the person transferring the property must have “usually” resided on the property on a seasonal basis;
• the property must be classified as “residential” by BC Assessment;
• the land is 5 hectares or 12.36 acres or less; and
• the entire property has a fair market value of $275,000 or less.

As you may have determined, the application and calculation of the property transfer tax is not a simple one. More exemptions will be discussed in future blogs.

In the meantime, don’t hesitate to contact us if you are uncertain about the property transfer tax.