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Questionnaire Real Estate Purchase Costs and Taxes Steps to a Purchase Real Estate Purchase Costs and Taxes |
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We charge a flat fee per transaction, so we will give you a quote well in advance of any work that we may undertake. Real Estate Agents charge a fess depending on the purchase or sale price of the transaction. This amount is negotiable with the agent. The Mortgage Broker also charges a flat fee and depending on the lender chosen there can be other charges. Legal fees can run from $300.00 for a sale to $500.00 for a purchase for a simple transaction. 2. Property & Title Insurance (Survey) All lenders in British Columbia will require insurance over the property in question. They require both the “Fire Insurance”, which cover them for the replacement value of the building in question and “Title Insurance” which covers them for any problems or issues with the title of the property. Some banks will accept a survey, if not too old. The survey will show if there are any problems with the location of the building, thus affecting the title. The costs vary depending on the company that you use. Title Insurance depends on the value of the property but runs from $200.00 to $500.00 and a survey runs from $300.00 to $500.00 depending on the location of the property. 3. Property Transfer Tax (first time homeowners exemption) Property Transfer Tax is a provincial tax on the transfer of real estate. It is 1% of the first $200,000 of value and 2% on the amount over $200,000. There is the “First Time Home Buyers Program”, which provides a tax exemption for individuals buying their first home. Buyers who meet the following conditions may be eligible for the exemption. The Buyer: Must be a Canadian citizen or permanent resident who has never owned a home anywhere in the world, and has lived in BC for one full year prior to the purchase, or filed two income tax returns as a BC resident within the last six years. The purchasers must also occupy the property as their principle residence for the first year of ownership. If the property is vacant land, the house must be constructed within one year of closing, and the buyer must live in the house for the balance of the year. The Property: Must not exceed $325,000 if located within the Capital Regional District or the Greater Vancouver and Fraser Valley Regional Districts, or $265,000 if located elsewhere in BC. A partial exemption is available for properties that have a value of up to $25,000 above these thresholds. The property must be classified as residential. If some of the buildings on the property are not classified as residential, or if the property exceeds 0.5 hectares (1.24 acres) in area, only a partial exemption is available. The Financing: Must be for at least 70% of the value of the property (not including amounts borrowed from related individuals, corporations or trusts). Assumed financing may be included. Must have term of at least one year. For detailed information, contact the Property Transfer Tax Information Line at (250) 387-0604 or visit the Property Transfer Tax page on the BC Government's website. 4. Property Tax (municipality) Individual municipalities levy annual property taxes. The value is set as of July 1, each year and is meant to reflect the market value as of that date. Citizens may appeal their assessment if they think it is too high. Municipalities then determine the rate of property tax to be levied based on this assessed value. Included in the annual tax notice are school and other taxes, which are set by the school district and other bodies. The cost of this tax is pro-rated and included in the closing costs. Visit our Links page for a list of links to Municipalities. 5. Goods and Services Tax (GST) The purchase of a brand new home, as distinct from a resale home, is usually subject to the federal GST. This tax stands at 5% (Jan 01, 2008) though a partial rebate is normally granted if the buyer plans to live in the home. The Realtor with whom you deal will be able to tell you more about this if it applies. You may also wish to contact the Canada Revenue Agency regarding whether GST would be applicable in your case and whether there are any other issues about which you should be aware. There is no requirement in British Columbia that the purchaser of property have residency or citizenship. To occupy residential premises, the non-resident must comply with immigration requirements. These vary depending upon the nationality of the individual involved. Please contact your Canadian Consulate regarding any residency issues that may apply.
Rental: Under the Income Tax Act a person paying rent to a non-resident is required to withhold 25% of the gross rent paid and remit it to the Receiver General for Canada. It is possible for the non-resident to elect to file Canadian income tax return. A property manager can then become responsible for filing the Canadian income tax returns and is exempt from the withholding requirements. The property manager can withhold and remit 25% of the net income derived from the property in question. Withholding Tax: When the non-resident sells property there are further tax issues. The Income Tax Act requires the purchaser of property from a non-resident to withhold a portion of the purchase price and to remit it to Canada Revenue Agency (CRA) within 30 days of the end of the month in which the purchase took place. The amount to be withheld is one quarter of the gross purchase price for non-depreciable property and half of the gross purchase price in the case of depreciable property. In most cases arrangements are made between the legal representatives for the vendor and the purchaser to withhold the appropriate amount of the purchase price until a clearance certificate is obtained, which can take several weeks. Once the property is sold and the clearance certificate obtained, the vendor may file a Canadian income tax return claiming the cost of sale and a credit for the tax paid at 25% against the actual tax. CRA will eventually issue a refund of the excess tax paid on closing costs. It is recommended that you check with Canada Revenue Agency and your own taxation authorities as there are significant implications should you earn any income for the property in BC (e.g., through rents during the period that you own the property, or capital gains when the property is sold). It’s also important to note that there may be tax implications when a non-resident property owner dies or when a property is transferred from a person to his or her company or relative, despite the fact that there may be no money. Classes of immigrants, there are several categories in which a person may apply for permanent residence in Canada:
NOTE: This is a very quick overview please contact Citizenship and Immigration Canada for more information.
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The Shipley Group Notary Public & Accounting Services 1551 Pandora Ave., Victoria, BC, V8R 6P9 Ph: 250.592.4342 Fx: 250.592.4386 |
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