The new 15% property purchase tax (the “PTT”) explained.
WHAT IS THE NEW TAX?
It is a property transfer tax of 15% payable by “foreign” buyers IN ADDITION TO the regular property transfer tax at the time a property transfer for residential property is registered in the land title office for properties located in “The Greater Vancouver Regional District” (the “GVRD”). This includes places like Surrey, Richmond, Delta, West Vancouver, Coquitlam, etc. but not Squamish, Whistler, Abbotsford, Vancouver Island, the Okanagan, etc.
So if a foreign buyer buys a $7 million residential property in West Vancouver the total property purchase tax would be:
WHO HAS TO PAY?
The tax has to be paid by “foreign entities”. That means foreign citizens, foreign companies and taxable trustees. Canadian citizens and Canadian permanent residents do not have to pay. Foreign corporations include companies set up outside Canada and Canadian companies that are controlled by foreign persons or by foreign companies.
WHAT SORT OF TRANSACTIONS ARE SUBJECT TO THIS TAX?
The tax is payable in respect of residential properties in the GVRD purchased by foreign buyers on or after August 2, 2016 at the time the transfer is registered in the land title office. It is payable even when the contract was finalized before August 2, 2016 and the parties unaware there would be a new tax.
ARE THERE ANY LOOPHOLES?
Not many. Non-residential property is not subject to the extra tax nor are properties outside the GVRD. Real estate investment trusts and mutual fund trusts are not subject to the extra tax. Penalties of $100,000 for individuals and $200,000 for corporations apply to anyone who participates in illegal tax avoidance. Presumably this includes lawyers, accountants and realtors who assist in illegal tax avoidance.
Written by Peter Scarrow, former immigration lawyer, currently is the Director of Asian Business at Macdonald Real Estate Group.