Property Purchase Tax Act Amendments #174
By Gerry Neely
A number of amendments have been made to the Property Purchase Tax Act, but those which will affect the largest number of licensees and purchasers are the amendments made to the principal residence exemption. A principal residence is defined as follows:
A principal residence is a parcel of land that does not exceed 2.03 hectares in area and which has improvements situated on it designed and used to accommodate no more than three families, on which a person usually resides and uses as their home. A person cannot have more than one principal residence."
The first amendment reduces the area from 2.03 ha to 0.5 ha. While this will reduce the full exemption for some properties, it will mean that parcels larger than 2.03 ha which are mainly outside the urban area will be entitled to a partial exemption.
The second amendment makes it clear that to obtain the full exemption, all of the improvements constructed upon the land must be classified under Section 26 of the Assessment Act as property used for residential purposes.
A third amendment establishes a partial exemption if the area exceeds 0.5 ha, or if not all of the land is classified as residential or a combination of both. If the area exceeds 0.5 ha, the fair market value which will be exempt from tax will be equal to the ratio of 0.5 ha to the total area of the land. If not all of the improvements are classified as residential, the fair market value of the improvements which are exempted will probably be based upon a similar ratio of the improvements assessed as residential to the total assessed value of the improvements. The exact method of calculation will have to await the publication of the regulation which will prescribe how fair market value is to be determined.
A housekeeping amendment clarifies that a family farm corporation need only have one shareholder to qualify for the exemption upon the transfer of the land owned by the family farm corporation to or from related individuals.
A further amendment will benefit those purchasers with high ratio mortgages who are disqualified for Property Purchase Tax relief because the transfer of title to the purchaser and the mortgage financing are not registered concurrently. In circumstances such as these where there was no fault on the part of the purchaser, the administrator now will have the authority to grant the tax relief if the administrator is satisfied that the failure was the result of circumstances beyond the purchaser's control.
In connection with this tax relief program, it is apparent that some purchasers have taken advantage of it by claiming the exemption even though not all of the monies secured by the high ratio loan were used to purchase the property (i.e., - a line of credit). Now the only part of the mortgage which will be included in determining how much tax relief should be given will be the part applied toward the purchase of the principal residence.
A significant change to close a loophole has been made to the exemption for properties transferred to a trustee other than upon death. The present exemption is available if property is transferred to the public trustee or to a trustee authorized to carry on a trust business under the Financial Institutions Act. In addition, the administration of the trust estate must be for the sole benefit of the person transferring the property (the settler), and on the termination of the trust the property reverts to the settler, or the executors or administrators of the settler's estate. The definition of "person" includes not only a natural person, but also a limited company, a partnership and an executor, administrator or trustee. The amendment will result in only a natural person as opposed to say a limited company being entitled to the exemption.
For those who have B.C. On-line, they will be able to obtain Property Purchase Tax Bulletins together with future bulletins, regulations, and amendments to the act.
To subscribe to receive BCREA publications such as this one, or to update your email address or current subscriptions, click here.
What we do
Popular tags within Legally Speaking
Popular posts from BCREA
Applications for BC Emergency Benefit for Workers Now OpenMay 01, 2020
First-Time Home Buyer Incentive Launches in SeptemberAug 22, 2019