This post talks about some of the taxes which can apply when you're purchasing (or holding) real estate in Nanaimo and the surrounding areas. Please note: I am not an authority; consult your accountant or tax advisor!
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Property Taxes
Most people are already familiar with this kind of real estate tax. It is charged by your local municipality or district and is used to fund local services like schools, police, firefighting, hospitals, road construction, parks, and much more.
The rate is applied against the "assessed value" of your property, as calculated each year by the BC Assessment Authority. The rate varies by area, but most people who own a home, condo, manufactured home or vacant land will pay between $1000-$10,000 per year for their property taxes. Getting a mortgage? Some lenders are happy to roll your property taxes into your mortgage payments, so that you don't get stuck with a big annual tax bill.
Property Transfer Tax (PTT)
This is a transactional (i.e., one-time) provincial sales tax that applies to many kinds of land title registrations - but most notably for our purposes, it applies to purchases of "used" (resale) properties. For example anyone buying a house built 10 years ago should expect to pay this tax when they purchase.
For newly subdivided lands* and brand new homes under $1,100,000, the more expensive GST will usually apply INSTEAD of the PTT. If you buy a new build for $1,100,000 or more, you might be paying both taxes.
*PTT also applies to vacant land, but there's a rebate available if you build a house within the first year and move into it as your principal residence. You will still pay the PTT up front however, then get it rebated later. In the past, this exemption did not apply if the value of the land/home was greater than $750,000; as of 2024 I am uncertain whether this rebate still exists, and/or whether the $750k number has been increased.
Some buyers are exempt for all or part of the PTT. If you are a Canadian citizen or permanent resident, have generally resided in BC recently, have never owned property anywhere, are using the home as your principal residence, the property's value is less than $835,000 and is less than 1.24 acres, then you will probably qualify. A partial exemption applies for properties between $835k and $860k. Also note that the federal government provides an income tax credit to first-time home buyers - ask your notary and tax person about that!
When you buy a mobile/manufactured home in a "park" where you don't own the land, you do NOT pay PTT since you are not getting an ownership interest in the land.
Property Transfer Tax Rate
The rate is based on the fair market value of the property (usually equal to your purchase price) and is calculated as follows:
- 1% on the first $200,000
- 2% on the portion above $200,000 up to $2,000,000
(E.g., $8,000 on a $500k purchase) - 3% above $2,000,000
- If the property is residential, a further 2% on the value above $3,000,000 also applies.
Additional Property Transfer Tax for Foreign Entities & Taxable Trustees
(Foreign Buyers Tax)
This provincial levy is an addition to the Property Transfer Tax. It applies to foreign nationals, taxable trustees, and foreign corporations.
On Vancouver Island, the tax is only applicable in the Capital Regional District (Victoria area) and within the Regional District of Nanaimo (which also includes Parskville/Qualicum). The notable exceptions within my service area (mid-Island) are Ladysmith and Chemainus, and Ruxton/Valdes Islands.
The rate is 20% of the fair market value of your proportionate share of the property. For example, if you own a 25% share of the applicable property, then you pay 20% on a quarter of the value of the property.
Capital Gains Tax
Once upon a time you could sell your investments (stocks, properties) at a profit without paying tax on that income. So while lower-class wage-earners were paying tax on their incomes, rich investors were not. To make this more equitable, the 1970s Trudeau government introduced the capital gains tax which adds 50% of the PROFIT (gain) from sales of capital assets to individuals' taxable income for that tax year. So in other words, if you bought a cottage or rental property for $250k and sold it 15 years later for $800k, then you are deemed to have earned $550k during the year that you sold it, and 50% of that earned profit ($225k) will be added to your taxable income for that year.
Notes:
The capital gains tax is not usually applied to the sale of your principle residence. However;
The federal "flipping tax" applies different rules to capital gains - see below.
Flipping Taxes (Federal and Provincial)
Canada's Flipping Tax
A "flipped property" is a housing unit (or a contract to own one*) which is owned for less than 365 days, and disposed of AT PROFIT for a non-exempt reason. The PROFIT is fully taxable as business income - it does not qualify for the 50-per-cent capital gains discount and it gets taxed even for the sale of a principal residence.
Note:
Exemptions may apply in situations where the quick sale was forced by "life events".
BC's Flipping Tax
A "flipped property" is a residentially-zoned property with housing unit(s) (or a contract to own one*), sold after Jan01, 2025, in which a profit is realized, IF the property was owned less than two years.
The tax rate is 20 percent of the INCOME EARNED (i.e., not 20% of the sale price) from properties sold within 365 days of purchase and it goes down to zero between 366 and 730 days.
Note:
Exemptions may apply in situations where the quick sale was forced by "life events".
*--The property that is sold may be a purchase contract which is sold ("assigned") at a profit. Imagine for example that you sign a contract to purchase a pre-sale condo for $800k and you pay a deposit; but before the condo is completed, the market has "gone up" and you are able to sell ("assign") the contract to a new buyer for $900k. You may be required to pay capital gains on the profit earned.
Speculation and Vacancy Tax (Annual)
This tax was created by the BC Government as a way to incentivize property owners to rent out their housing stock, rather than keeping it vacant. This should help to make the rental market more affordable by increasing inventory. Each year, owners have to fill out a declaration for each property, identifying how they are using it. Only about 1% of the population has to pay this tax.
What Uses are Taxed?
Effectively, it is vacant homes that incur the tax. If you live in the home or rent it out "long term" (for at least 6 months/year in increments of at least 30 days), you probably won't have to pay.
How Much does it Cost?
The tax rate is 0.5% of the assessed value, paid annually. It is 2% for foreign owners or for people who report most of their income outside of Canada.
Does it apply to all of BC?
The tax is meant to apply to only the areas where affordability is worst. On Vancouver Island, the tax only applies to properties in Lantzville, the City of Nanaimo, or in the Victoria area.
July 2022 UPDATE: It has been expanded to include North Cowichan, Duncan, Ladysmith and Lake Cowichan!
Most of the Regional District of Nanaimo is exempt outside of Lantzville and the City of Nanaimo. That means you won't pay the tax in Parksville, Qualicum, or the following areas of Nanaimo:
- Most of Cedar
- Extension, Cassidy, South Wellington, Upper Nanaimo River
- North Jingle Pot (roughly west of McGarrigle Creek to Brannen Lake)
Island properties (not counting Vancouver Island) are also exempt - for example, Protection Islanders don't have to pay.
Exemptions
There are lots of exemptions, including the ones listed below - however, please don't rely on the accuracy of this list! Consult a tax professional or accountant to confirm any information you see here.
- Property has rental restrictions (e.g., it's a condo and the strata doesn't allow rentals) - however this will no longer apply after 2021!
- Major home renovations and life events like divorce, hospitalization, extended absence, or administration of an estate
- Housing co-ops
- Property has an assessed value under $150,000
- Member of the Canadian Armed Forces
- Property includes a licensed child daycare
- Person with a disability lives in the residence
- Living apart from spouse for work or medical reasons
- Property is in a trust created by a will for a minor
It appears that as of 2020, the tax applies to vacant land if the owner isn't taking steps to build a residence or to prepare the lot for such.
Empty Homes Tax
This City of Vancouver tax does not apply outside of that city, but has been widely discussed and therefore is often mixed up with the provincial tax outlined above.
GST
The goods and services tax (GST) is 5% of the purchase price, and is due upon completion of the sale. It is prudent to expect that it WILL apply to a transaction unless you can get confirmation of an exemption, because the rules can be confusing and 5% is a big chunk of change! In most cases, the application of GST comes down to how the property was used by the seller, or whether it was previously occupied.
Fortunately, the majority of purchases of "used" homes aren't GST-taxable. The tax does apply on the sale of brand new builds, whether it's a house or a new-construction condo unit, and also to certain purchases of vacant land, and properties used for short-term rental or other kinds of commercial use including hobby farms.
In May 2025, the federal government announced there will be a full rebate of the GST paid on NEW-built homes under $1 million, as well as a partial rebate for homes from $1M-$1.5M.
The standardized form used as a purchase contract for real estate in BC has a clause which states that IF there will be any GST required to be paid from the transaction, it will be the seller who pays it. This update to the contracts occurred in 2024 and it was a great move because traditionally, a buyer could be left with a surprise GST bill owing to the property having been used by the seller in a way that would incur the GST, without the buyer having known about it - the buyer didn't say anything about it in the contract because they couldn't know that GST would apply. Note, if the seller is not a Canadian resident, I recommend looking into the GST implications of that.
But it should be noted that in new construction transactions, the buyer typically pays the GST and the builder will use a modified purchase contract to allow for this. This is "normal" and how it has been done in most cases since the GST came into being. It is sometimes negotiable however - the builder will sometimes pay the GST.
Other things that may trigger GST applicability in a transaction:
- When it's a home that has been "substantially renovated" (e.g., down to the studs, etc.)
- Income earned from assigning a pre-sale contract (this started in 2022)
- The property is owned under a corporate name
- The property was used for short-term accommodation (e.g., AirBnB)
- A home-based business or farm was operated from the property
- Certain vacant lots
- The seller is a GST registrant
There are sometimes rebates against the GST, for example when your purchase price is below a certain threshold, or when the property qualifies for the new "residential rental property rebate". This should all be discussed with your accountant, notary, or other qualified tax professional as early as possible.
Non-resident withholding
If you are not a resident of Canada but you are earning income from a Canadian source (e.g., selling your property in Canada), you must pay income tax to our fed. A portion of the proceeds from your sale may need to be set aside under certain circumstances. This is something to discuss with your notary, lawyer, or accountant!
Underused Housing Tax
This is a federal tax which mainly applies to non-Canadian owners of land in Canada, but it also applies to some Canadians. It is a 1% annual tax on under-used/vacant property.
Tax-Related Benefits
Buyers should be aware they may qualify for certain tax-related benefits which could influence their decision about what to purchase. Here are examples:
- As stated above, BC's First Time Home Buyers’ Program can exempt first-time home buyers from paying the provincial property transfer tax
- Canada's RRSP Home Buyers’ Plan allows withdrawal of RRSP savings to put toward the purchase or construction of a home for yourself or for "a specified disabled person".
- Canada offers a full or partial GST New Housing Rebate on new builds up to $450,000. This number will likely increase over time as its relevance fades - very few new builds are offered for less than $450k, even in Nanaimo.
- The federal First Time Home Buyers’ Tax Credit may allow $10,000 from your purchase to be claimed as an income deduction in that year.
- In 2022 the fed introduced the First Home Savings Account (FHSA) which allows a first time buyer to put money away for a future down payment, sheltered from taxes. In other words, if you make $50,000 this year and you manage to put $4000 of that money into a FHSA, then you only need to claim $46,000 in income this year. Moreover, you still don't pay any tax on that income when you withdraw it from the FHSA as long as you are actually applying it toward your property purchase.
This page has been provided simply as a ROUGH guide to understanding some of the taxes which might be applicable when you are getting involved with real estate. But this is not my specialty - contact me if you want to talk about buying and selling real estate!
Posted by Gerry Thomasen on
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