The 2016/17 British Columbia Budget’s impact on Commercial Real Estate Transactions
Posted in Tax

The BC 2016/17 Budget, released on February 16, 2016, implemented changes to the Property Transfer Tax Act and to the Land Title Act in the form of increased tax rates, citizenship disclosure requirements and a new PTT exemption.  The Budget did not change the current PTT treatment of unregistered beneficial conveyances, but it did create a new disclosure requirement for bare trusts, as well as any person registering any charge on land (other than a mortgage or a money judgment).

Increase in PTT

Effective February 17, 2016, the PTT payable on registered transfers with a fair market value in excess of $2 million will be taxed at 3% for the portion in excess of $2 million, representing a 1% increase in the tax rate after the $2 million threshold is met.  PTT payable on amounts less than $2 million remains unchanged (1% on the first $200,000, and 2% on amounts between $200,001 and $2 million).  This increased tax rate will now have to be factored into a purchaser’s closing costs.

Required Disclosure of Citizenship Information

Certain new disclosure requirements have also been introduced in order to allow Government to track the citizenship of real estate purchasers. The forms required to implement the new required disclosures are not yet available, and are expected to be introduced by regulation in Spring, 2016. Once the forms are introduced, corporations submitting a PTT return will have to disclose the citizenship of their directors, as well as the names and addresses of any non-Canadian directors.  Individual purchasers will similarly have to disclose their citizenship.  If title is being registered in the name of a bare trustee, the names, addresses and citizenship of the beneficial owner must be disclosed. The citizenship disclosure will not only apply to fee simple transfers, as any person registering any charge on land (other than a mortgage or a money judgment) is required to disclose, at the time of registration, whether they are a Canadian citizen, a permanent resident, or a citizen of a foreign state.

New Housing Exemption

Government also created a new PTT exemption called the “New Housing Exemption”.  Under this exemption, there is no PTT payable by Canadian citizens and permanent residents purchasing newly constructed homes with a purchase price of up to $750,000, provided that they live in the home as a principal residence for at least one year after the date of purchase. A partial, graduated exemption for purchases between $750,001 and $800,000 is also now available.  As a result, we should expect to see developers target this exemption with strategic new home pricing for appropriate product. Note that a purchaser claiming under the New Housing Exemption is required to include their SIN number on the PTT form.



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