Real Estate Taxes-Canada
Property Transfer Tax
- This is a tax payable to register or change the title of a property at the land registry.
- The amount is set by each Province or Territory.
- The rates in British Columbia, for example, are 1% for the first $200,000 of the purchase price and 2% above $200,000. The tax payable on a $500,000 property is $8,000 [200,000 x 0.01 + (500,000 - 200,000) x 0.02].
Annual Property Taxes
- Just like the old system of Rates in the UK, municipalities collect an annual tax based on the value of your home or other real estate you own.
- This is to pay for municipal services, policing, water and sewage (sometimes billed separately), and a contribution to the Provincial education budget.
- The value of each property is reassessed every year. Assessment notices are mailed at the beginning of January.
- Bills are sent out in May and must be paid at the beginning of July.
- Real estate taxes are assessed on the owner of the property, not the occupier.
- If you are renting a place you do not have to pay this tax (although the cost will be included as part of the rent).
- In BC there is a discount for owner occupiers in all but the most expensive homes.
- There is a further discount for owner occupiers who are seniors and those with disabilities or have someone with a disability resident with them.
- Home owner grants and the grant for seniors/people with disabilities are not automatic; they have to be claimed on the property tax form.
- There are stiff penalties for non-payment, and if the tax is two or more years late the city can sell the property from under your feet.
- Because of this, if you have a mortgage, the bank usually insists that you pay the property tax monthly in advance to them, and they use this to pay the city when it becomes due.
- A builder or developer is required to charge [GST] at 5% on new, or substantially renovated homes.
- If the home is sold for less than $450,000, and will be the principal private residence of the purchaser, then some of the GST can be reclaimed.
- For a home that costs less than $350,000 the amount of GST that can be claimed is 36% of the GST paid. The maximum claim is $6,300. (350,000 x .05 x .36)
- As the price increases the amount of GST that can be reclaimed is reduced. At $450,000 the GST is payable in full.
- Look for words such as "price includes net GST".
- This claim can be made by either the builder or the purchaser, so confirm the situation with your realtor and/or with your lawyer.
- In the HST provinces (Maritimes, Ontario and BC) HST also applies to the purchase price of new homes. There are exemptions available. For example, in BC HST only applies to new homes that sell for $525,000 or more.
- Note that GST/HST is only charged on new or substantially renovated homes. There is no sales tax on used homes.