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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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 one-time provincial sales tax on purchases of "used" (resale) properties. For newly subdivided lands* and brand new homes under $750k, the more expensive GST will usually apply INSTEAD of the PTT. If you buy a new build for $750,000 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. This exemption does not apply if the value of the land/home are under $750,000.
Some buyers are exempt for all or part of this tax. 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 $500,000 and is less than 1.24 acres, then you will probably qualify. A partial exemption applies for properties under $525k. Also note that the federal government provides an income tax credit (up to $750) 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 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.
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.
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.
The provincial 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 your purchase unless you can get confirmation of an exemption. Fortunately for most real estate buyers, GST seldom applies to resale homes. It commonly DOES apply to brand new builds, vacant land that hasn't been sold before (unless it's just a single parcel subdivided off a parent parcel), and properties used for short-term rental or other kinds of commercial use.
This tax may also apply when it's a resale property with a building(s) that has been "substantially renovated" (e.g., down to the studs, etc.). Also, as of 2022 you are required to pay GST on any income you earn from assigning a contract.
There are sometimes rebates against the GST, for example when your purchase price is below $450,000 (yes, this amount is becoming meaningless as values rise).
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!
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