As intended by the BC government, many buyers have been dissuaded from buying residential properties in BC due to the 20% Foreign Buyers Tax. However, it is possible to avoid paying and/or apply for a refund under certain circumstances.
Understand: First, you need to understand what taxes will be payable on closing of a residential property. To start, a general property tax and 5% GST will be payable. The general property tax is calculated at different marginal tax rates based on the fair market value of the property:
1%: $0 to $200K
2%: $200K to $2M
5%: Greater than $2M
See below for details:
20% Foreign Buyers Tax: Next, you need to understand if you will be subject to the Foreign Buyers Tax. Only buyers who are considered “Foreign Nationals" are subject to the tax. Non-Canadian and Non-Permanent Residents of Canada are considered “Foreign Nationals" by the Immigration Act of Canada.
See below for clarification.
How to avoid paying the tax: Canadian citizens are automatically exempted. For Non-Canadians, you will need to become a Permanent Resident before buying a property to avoid the tax.
What if I buy & register a property today and will receive my Permanent Residency in the future, can I get a refund? Yes, it is possible under these circumstances which are:
- Gain permanent residency or citizenship within 1 year of Land Title registration
- Use home as principle residence
- Live in principle residence for 1 year minimum
- Move into home within 92 days of registration
Additional requirements: a) This refund can be claimed only once and b) The purchaser must apply for the refund between 12 months and 18 months after the registration date
Note that principal residence is defined as:
A principal residence is the usual place that a person makes their home.
If a person owns more than one home, they can’t designate which one is their principal residence. Their principal residence is where they live and conduct their daily affairs, like paying bills and receiving mail, and it’s generally the residence used in government records for things like income tax, Medical Services Plan, driver’s licence and vehicle registration.
If you know you can fulfill these rules, than you can proceed with buying your new home today.
Some developers such as Westbank have created buyers programs help you avoid paying the tax based on these rules. In addition, they offer strata offices for investors that are not subject to the foreign buyer’s tax. Contact us today for more details!