What are the Costs of Buying Property in Canada
Real Estate Purchases by Americans, Non-Resident or Foreign Buyers in Greater Victoria

Victoria, BC is a very desirable place to live and own property.  The mild temperate climate combined with the many offerings of Vancouver Island draw people from other provinces across Canada and from around the world.

If you live in the United States or other countries and are considering purchasing in the Greater Victoria area, Vancouver Island or the Gulf Island  there are some costs and considerations you should be aware of.

With a few exceptions, every buyer of property in BC pays a Property Transfer Tax on the purchase of that property. The Property Transfer Tax is 1% of the fair market value of the property up to and including $200,000; 2% of the fair market value greater than $200,000 and up to and including $2,000,000; 3% of the fair market value greater than $2,000,000; and a further 2% on residential property over $3,000,000.

If you are not a Canadian citizen, you may also be affected by the Prohibition on  the Purchase of Residential Property Act by Canadians Act  in certain areas or the Foreign Buyer’s tax.

Prohibition on  the Purchase of Residential Property Act by Canadians Act

Starting January 1, 2023, non-Canadians will be prohibited from purchasing residential real estate in Canada. The ban which was set to expire on January 1, 2025 was extended by the Canada Government until January 1, 2027 in response to rising housing costs.  There are  several exceptions, including:

• Individuals who purchase residential property with a spouse or common-law partner who is Canadian or eligible to purchase property in Canada
• Temporary residents in Canada including students and foreign workers who meet specified criteria
• Permanent Residents
• Protected Persons: Individuals who are protected within the meaning of the Immigration and Refugee Protection Act
• Spouses or Common-Law Partners.  Non-Canadians who purchase residential property in Canada with their spouse or common-law partner are exempt if the spouse or common-law partner is a Canada citizen, a person registered as an Indian undertake Indian Act, a permanent resident, a temporary resident who satisfies prescribed conditions.
• US and buyers from other Foreign countries are also eligible to purchase in certain areas that are outside of Census Metropolitan areas or Census Agglomeration areas, of which there are several near Victoria and Vancouver Island.

Foreign Buyer’s Tax on home and property purchases

If you are a “foreign national” you will also be subject to what is commonly referred to as a “Foreign Buyers Tax”, which is an additional property transfer tax on your share of the market value of the property.  This tax applies to homes and land anywhere in the Capital Regional District (CRD), which includes Central Saanich, Colwood, Esquimalt, Highlands, Langford, Metchosin, North Saanich, Oak Bay, Saanich, Sidney, Sooke, Victoria, View Royal, some Gulf Islands and CRD electoral areas.  A “foreign national” is a person who is not a Canadian citizen or permanent resident of Canada.  Foreign corporations and taxable trustees are also subject to the Foreign Buyers Tax.

The Foreign Buyers Tax rate is 20% of the fair market value of the property and is applied once at the time of purchase.

There are some exemptions to this tax, including if you are confirmed on the BC Provincial Nominee Program or if you are acquiring a property on behalf of a Canadian-controlled limited partnership.  If you are purchasing the home with someone who is Canadian, you would only pay the Foreign Buyers Tax on your portion of ownership. For example, if you are purchasing a home with your spouse who is Canadian, and you are a citizen of another country, but you are taking ownership 50/50, you would only pay the Foreign Buyers Tax on 50% of the market value.

The Speculation and/or Vacancy Tax

Most areas of Greater Victoria are also subject to a Speculation Tax. The Speculation Tax is an annual tax that applies to property that is not used as the property owner’s principal residence or is left vacant for more than 6 months of the year.   All property owners in affected areas must complete a declaration every March if they wish to be exempt from the Speculation Tax.

The Speculation Tax applies most residential property in Central Saanich, Colwood, Esquimalt, Highlands, Langford, Metchosin, North Saanich, Oak Bay, Saanich, Sidney, Sooke, Victoria and View Royal.  Properties on the Gulf Islands and select other areas are exempt from this tax.  You can find the speculation tax areas here.

The annual Speculation Tax rate is 2% for foreign owners and satellite families and 0.5% for Canadian citizens or permanent residents of Canada who are not members of a satellite family.

You do not pay the Speculation Tax the same year that you purchased the property and paid the property transfer tax.

There are a number of exemptions from the Speculation Tax. For example, you will not have to pay the Speculation Tax if the property is uninhabitable, if the house or a rentable suite in the house is occupied for a least 6 months, if the residence is close to a medical treatment facility and you have written certification from a medical practitioner that you need access, for certain situations when you are required to live in another location for work, etc.  You can find a full list of the Speculation Tax exemptions here.  It is important to note, that there are many rules that you will need to adhere to when applying for an exemption, so speaking to an accountant is recommended.  For example, to qualify for the tenanted property exemption it is important to note that a 6 month exemption applies only if it is an arm’s length tenant and the six month rental requirement was achieved in a minimum of one month increments.

In addition to taxes, there are other costs that come into play when purchasing property in Greater Victoria.  These real estate purchasing costs are associated with transferring title, legal costs and ensuring that you are looking after your best interests; for example, getting a home inspection done. You can find a list of the costs of buying and selling a home in Victoria here.

If you have any questions about moving and buying property in and around Victoria BC,  contact us we are here to help.

 

Note:  The city of Vancouver’s empty homes tax is different than the BC Governments Speculation Tax.