My_question_is: Applicable to both US and Canada
Subject: real estate transfer tax
Expert: taxman at centa.com
Date: Sunday August 21, 2005
Time: 03:06 PM -0700
QUESTION:
Y
If a US citizen owns residential property in Canada, and wants to
transfer the property to another US citizen, what is the transfer
tax, and how is it calculated? Tahnks
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david ingram replies:
The only province in Canada that has a property purchase tax is
British Columbia as far as i know.
The tax is payable on the fair market value as defined at
http://www.rev.gov.bc.ca/rpt/ptt/ptt.htm part of which is
repeated here:
What is Fair Market Value?
Under the Property Transfer Tax Act, tax is payable based on the
fair market value of the property. Fair market value is defined
as the amount that would have been paid for the property had it
been sold at the date of registration of the transfer at the Land
Title Office in the open market by a willing seller to a willing
purchaser.
Usually fair market value is the purchase price. In other
instances, such as where no money changes hands or the transfer
did not take place in the open market, the fair market value must
be determined by other means, such as an appraisal or by
reference to the most relevant BC Assessment value.
An open market is where the property is offered for sale so that
anyone likely to be interested in purchasing it may make an
offer. Often for residential property this is done by listing the
property with a realtor or by advertising in the press and
putting out a “For Sale” sign. If your tax return is reviewed by
this office you may be asked to provide evidence of how you knew
the property was for sale.
The BC Government's 5 page guide can be found at:
http://www.rev.gov.bc.ca/rpt/ptt/FormsandGuides/0579Guide.pdf
The actual rate is 1% of the first $200,000 and 2% of the
balance.
The actual form for your form (there are three different forms)
is at:
http://www.rev.gov.bc.ca/rpt/ptt/FormsandGuides/0579Gsample.pdf
The foregoing assumes the property was in British Columbia - The
following applies to all provinces and territories.
================================================================
REMEMBER: When you transfer the property as a non-resident there
will be a non-resident withholding tax of 25% of its gross value
unless you file form T2062. Filing T2062 means they will only
withhold 25% tax on the actual capital gain (with no deduction
for real estate commissions at this time) At the end of 2005, you
will have to file a Canadian return to report and pay tax on the
gain. The withholding tax will always cover the tax and this
return usually results in a refund as the tax on the capital
gains runs from about 22% to 47% on one-half of the gain
depending on the province or territory
It will also have to be included on your US return but you can
claim a foreign tax credit on US form 1116 for any tax paid to
Canada.
================================================
Answers to this and other similar questions can be obtained free
on Air every Sunday morning.
Every Sunday at 9:00 AM on 600AM in Vancouver, I, david ingram am
a permanent guest on Fred Snyder of Dundee Wealth Managers' LIVE
talk show called "ITS YOUR MONEY"
Those outside of the Lower Mainland will be able to listen on the
internet at
www.600AM.com
Call (604) 280-0600 to have your question answered. BC listeners
can also call 1-866-778-0600.
Callers to the show and questioners on this board can also attend
the Thursday Night seminars on finance and making your Canadian
Mortgage Interest deductible.
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