If you're a first-time home buyer in BC, you probably qualify to save up to $7,500 on your life-changing purchase. What a gift! Property Transfer Tax (PTT) is a provincial tax payable on the purchase of property in BC. It's calculated at 1 per cent on the first $200,000 and 2 per cent on the balance of the purchase price. So, for a $400,000 property, PTT would be $6,000. That's a lot of tax.
The provincial government introduced the tax in 1987 but, recognizing that the tax would be an obstacle to home ownership, it provided an exemption for "first-time" buyers. However, not everyone who has never owned a home is a first-time buyer under the Act.
You have to satisfy all of these requirements to qualify for the exemption.
1. You must never have owned a principal residence anywhere in the world
The key words here are "principal residence," which is a place of residence where an individual normally resides.If you have been or are currently a registered owner of an investment property or on title to your parents' home, but in neither situation did you occupy it as your principal residence, you still qualify under this requirement.
2. You must have lived in BC for at least the 12 consecutive months immediately before the date of registration of transfer of the property
If you are relatively new to BC and at 10 months decide to buy a property, you want to make sure you delay closing for two months. If you have not lived in BC for at least 12 consecutive months before the transfer, you could still qualify if you have filed income tax returns as a BC resident for at least two of the preceding six years.
3. You must be a Canadian citizen or permanent resident
If you are not a Canadian citizen or permanent resident at the time of the purchase but become one within 12 months of the transfer of ownership in the property, you can retroactively apply for the exemption.
4. The fair market value of the property must be less than $475,000
This can be a tough one in Vancouver. To receive the full exemption, the price threshold is $475,000. There is a partial exemption for properties valued between $475,000 and $500,000. There is no exemption for properties beyond $500,000.
5. You must actually live in it
At the end of the first year after your purchase you'll receive a letter from the government asking you to confirm that you moved in within 92 days of transfer of title and that you occupied the property as your principal residence for the remainder of the first year. If you did not move in within 92 days, you will be charged the tax. If you moved out within the first year you will be charged for a prorated portion of the tax. If you pass away or the property is transferred pursuant to a separation agreement or court order, you still keep the exemption.
A word of warning, the government audits exemption claims and if they determine that you filed a false claim you are charged a penalty equal to twice the amount of tax you should have paid.
If you're not sure if you qualify, ask your legal advisor.