Chapter 5.2: Taxes On Real Property Flashcards
What does GST stand for!
Goods and services tax
What is GST?
Taxes on the purchase or sale of real property
GST is a ____________ tax
Federal
Compared to income tax, GST has a relatively _______________ of taxation
Low rate
GST is imposed under the _________________
Excise Tax Act (ETA)
GST applies to ______ transactions, unless it is expressly listed as an exemption in the Excise Tax Act
All
If you owe GST it is a _____________ and is payable immediately - pay now, dispute late
debt to CRA
The ____________ has the obligation to pay the GST
Buyer!
The recipient
GST generally does not apply to the amount of the ___________ until the closing date at which time the full amount of the sale price becomes taxable
Deposit
Including the deposit (also taxable)
No GST applies to _______________ for prepayments
Reimbursements
Only amounts on the statement of adjustments that are legal components of the purchase price are subject to _______
GST
The _________ collects the GST as an agent for the ____________. It is deemed to be held in trust
Seller government
When the __________ collects GST from the __________, it is deemed to be held in trust for the ______________ until it is remitted
Seller
Buyer
Government
Where a seller fails to collect GST from the buyer, the seller becomes ______________ to the government for the amount of the tax
Equally liable
The seller has the right to pursue the buyer for what?
The uncollected GST they forget to collect
To dispute a GST claim, you have _________ from the date of assessment to file an objection first with the CRA
90 days
The 90 day CRA claim can later be appealed to what 3 parties?
- tax court of Canada
- federal court of appeal
- Supreme Court of Canada
What is the self supply rule?
Builder or tenant moved into a new build
Seller PAYS THE GST and cannot charge the buyer later
____________________: GST deduction a person can claim on their GST return for the amount of GST paid by that person on the acquisition of property or services
Input tax credit
2 specifics with input tax credit
Commercial real property transaction
Buyer is responsible for reporting the GST
________: a form of tax recovery that allows non-businesses to recover GST paid with respect to certain transactions
Rebates
Individuals entitled to the rebate are generally required to file a ________________
Rebate application form
Rebates must be filed with the CRA within ___________ of the purchase
2 years
The CRA has the power to audit and then assess a buyer or seller in respect of a _____________
GST amount
To dispute a _________, you have 90 days from the date of the assessment to file an objection with the CRA, then tax court, then federal court of appeal, then Supreme Court of Canada
Rebate
What is included in the title, residential complex
- detached homes
- condominium unit (strata)
- land (that is reasonably necessary for use and enjoyment of complex as a place of residence)
Seller may be required to collect the GST
GST is excluded in what three items
1) hotels - subject to GST
2) short term rental (AirBNB) - subject to GST
3) assignment fees - subject to GST
PTT stands for what?
Property transfer tax
What is property transfer tax
Taxes on ownership / use of real property, BEFORE you purchase
Property transfer tax is whose responsibility?
The buyers
__________________ applies to any transfer of a interest that is ___________ at the land title office. Including the sale of a fee simple interest, agreement for sale, a life estate, and a crown grant
Property transfer tax
Registered
Property transfer tax is payable by the __________ on the fair market value (at date of registration)
Buyer
For ____________________, PTT is generally calculated with reference to all _______________, including some machinery or equipment and may also be subject to PST
Commercial properties
Fixtures
Property transfer tax and foreign buyers tax
Basic PPT payable + 20% fair market value
Foreign buyers tax is how much?
20% fool
Foreign buyer tax applies to what?
Residential properties in greater Vancouver regional district (GVRD), capital regional district, Fraser valley, central Okanagan, and Nanaimo district
If a property has both residential and commercial components, then how does foreign buyers tax apply
Foreign buyers tax will only apply to the residential portion not the commercial
Exceptions to the foreign buyers tax includ:e:
An individual who purchases property, pays the foreign buyers tax, and within a year becomes a permanent resident or citizen of Canada, is eligible to claim back the foreign buyers tax that he paid
What are the two main conditions for the application of the foreign buyers tax
1) the nature and location of the property (only residential)
2) the identity of the buyer
Foreign buyers tax conditions for application: the identity of the buyer (3 types)
- foreign national
- foreign corporation
- taxable trustee
Foreign National
1/3 types of identities for the foreign tax buyer
Not a Canadian citizen or permanent resident of Canada
Foreign corporation
1/3 types of identities for the foreign tax buyer
Non Canadian corporation or a Canadian corporation controlled by a foreign national or another foreign corporation
Taxable trustee
1/3 types of identities for the foreign tax buyer
Trustee that is a foreign national and r foreign corporation, or a Canadian citizen or corporation that is holding title for a foreign national or foreign corporation
- even if held in a Canadian name you must still pay
To be eligible for the first time homebuyers program, the buyer must be a ___________ or ______________
Canadian citizen
permanent resident Canada
To be eligible for the first time homebuyers program, the buyer generally must have lived in the province for a _________ before the purchase
Year
To be eligible to the first time homebuyers program, the buyer cannot have previously owned a _________________ anywhere in the world
principal residence
To be eligible for the first time homebuyers program, the buyer must become the buyers principal residence, have a fair market value of less than $_____________, and be _______ hectors or smaller
$500,000
0.5 hectares
Withholding taxes for non-residents who sell property
If the seller is not a resident of Canada, ____ percentage of the gross proceeds is required to be withheld by the buyer and remitted to ____________
25%
Canada revenue agency
Newly built home exemption program, two criteria
1) The buyer must be a Canadian citizen or permanent resident of Canada
2) The property must become the buyers principal residence, had a thing of market value of less than $750,000
What is capital gain
A profit earned from the sale of a property or other investment
50% or 100% of the profit realized (earned) on the sale of property is taxed, depending on whether or is considered a true __________ or ________
Capital gain
Business income
Capital gains taxes applies to three things, what are they
1) property earning revenues (Rentals)
2) long term investment
3) purchase to ‘flip’ for a profit
*50% of the profit is taxed when it is capital gain
How can you be exam from capital gain taxation
If the entire property is your principal residence (to live in)
_____________: includes money earned from any activity that is done for the purpose of making a profit
Business income
________________ is taxable at individual income or corporate tax rates
Business income
Flipping real estate is a business venture and ______% of the profit is taxable
100
Under business income
Instead of 50% of profit for capital gain
How can you differentiate between business income and capital gain
-the intention / motive of the owner
- financing method (short term
financing to sell quickly to make profit) - the length of time the seller owned the property
- how the owner intends to use it
- The frequency or number of other similar transactions by the owner
What are the three taxes paid while holding real estate property?
1) property tax
2) speculation and vacancy tac (SVT)
3) empty house tax (EHT)
__________________: the actual value of the real property as determined by the assessor, less any exemptions that apply
Net Taxable Value (NTV)
NTV =
(Taxes / Mill Rate) x 1000
Mill rate is what?
The tax rate applied to each $1000 of net taxable value
Reminder, NTV =
(Taxes / mill rate) x 1000
Taxes =
(NTV / 1000) x mill rate
Just rearranged, don’t let it scare you
NTV example
You own a house in Nanaimo and owe $1134.82 for general taxes. If Nanaimo‘s general tax mill rate is 4.829, what is the net taxable value of your house?
NTV = (taxes / mil rate) x 100
NTV = ($1134.82 / 4.829) x 1000 NTV = $235, 001
Taxes = formula example
You own a house in Vernon and the taxable value of the property is $450,000. If Vernon‘s general tax Mil rate is 5.41, how much amount of taxes are owed
Taxes = (NTV / 1000) x mill rate
Taxes = (450,000 / 1000) x 5.41 Taxes = $2434.50
There is no single statute in BC that provides a comprehensive explanation of the ___________________
property tax system
What are the 8 property tax systems?
1) Assessment Act
2) Community Charter
3) Vancouver Charter
4) School Act
5) Home Owner Grant Act
6) Land Tax Deferment Act
7) Local Government Act
8) Taxation (rural area) Tax
Remember, act means
Statute law
Who pays property taxes?
The Owner pays for Property Taxes!
- Owner of fee simple interest
- Owner of a life estate
- Owner of an Agreement for sale
- tenant for life
- owner of the improvement
Do not pay for taxes when you are on a _________________
Residential lease
Are charities exempt from paying taxes?
Fuck no!
What values are taxed?
The assessors decision is based on: 
- location
- present use
- rental or revenue potential
- selling price of land and the improvements
- obsolescence (economic and functional)
- replacement cost
___________________ : an extract from the assessment roll informs the property owner of the actual value of his property
Assessment notice
Assessed value =
Actual value!
The assessor values the property as of __________ of the previous year 
July 1st
A tax notice is:
A request for payment of taxes
When are tax notices mail to owners?
Tax notices are mailed to owners at the end of December
Typically received by owners in January
_____________________________: A division of a properties value between two or more property classes, by an assessor, after considering and satisfying certain criteria
Split classification taxation
When will BC assessment mail assessment notice to property owners?
December 31st
Let’s discern between an assessment appraisel (assessor) and a private fee appraisal
Assessment appraisal (assessor)
- constrained to certain dates
- must value all interests in land
- can not adjust estimate of value to reflect tenants interest
- has data for all real property transactions reported by land title office
Private Fee Appraisal
- flexible dates
- flexible with what they value
- can adjust estimate of value to reflect tenants interest
- Doesn’t have access to all transaction reports
Who is eligible for a homeowners grant
Only the owner-occupier of the property is eligible
Column B
Who is exempt from taxation?
- properties owned by the crown
- Municipal properties such as hospitals, schools, aboriginal lands
- Universities, colleges, schools
- cemeteries
- churches
- some farms
- forest land
- golf courses
- home owner grant
- BC Railway, libraries 
A tax deferral means what?
You can pay it later! Still gotta pay it, just not now
Who is eligible for a tax deferral?
1) widow / widower
2) 55 years or older
3) permanently disabled (physically)
4) financially supporting a child
3 criteria to meet tax deferral for the 4 categories
1) must be Canadian citizen / landed immigrant
2) must have lived in BC for 1 year
3) must own a certain % of equity in the property
% of equity to be eligible for tax deferral, widows and 55 years and older
25% equity
% of equity for tax deferral: permanently disabled and financially supporting a child
15% equity
Who can appeal an assessment?
Anyone! You can always appeal too
When would you appeal an assessment?
- wrongfully valued
- change of use
- wrong personal information
- improperly classified
- wrong exemption allowed
There are _____ assessment appeal levels
4
The 4 assessment appeal levels
From top: Property assessment review PANEL Property assessment appeal BOARD Supreme Court of BC BC Court of Appeal
Pneumonic for the assessment appeal levels
Peanut Butter Sandwich Allergy
Panel, Board, Supreme, Appeal
How many days do you have to appeal the Property Assessment Panel
January 31st
Not really days
When must you appeal an assessment to the property assessment appeal board
By April 30th
How many days after the Property assessment appeal board do you have to contract the next level, Supreme Court of BC
Within 21 days of board decision
How many days after the Supreme Court of BC’s decision do you have to appeal to the next level
To BC court of appeal within 30 days of Supreme Court decision
if the property assessment appeal board made a legal error in its decision, you can apply within ___________ after you receive decision
21 days
The __________________ is an annual tax that is payable by any registered owner or co-owner of ______________ located in designated taxable regions of British Columbia, unless the owner qualifies for an exemption
Speculation and Vacancy Tax (SVT)
Residential property
Speculation and vacancy tax specifics
Annual tax - each owner must complete annual declaration
Applies to residential property in specific, taxable regions of BC - no commercial
Can claim exemption or get tax credits
If you have to pay speculation and vacancy tax, the rate of tax depends on who you are, what are the rates:
1) 2% of assessed value for foreign owners and satellite family members
2) 0.5% of assessed value for Canadian citizens or permanent resident of Canada (and not members of a satellite family)
What is a satellite family
An individual or spousal unit that declares less than 50% of their total combined household income for the year on Canadian income tax returns
Example 1 of satellite family: 70% income outside of Canada, not reported
1 spouse - Canadian citizen, not the house owner
= both satellite family members
Example 2 of satellite family: 100% income outside of Canada, not reported
1) spouse + kids - live in BC not the house owners
2) spouse - outside of Canada most of the time, owns the house, 100% income outside of Canada
= both satellite family members
There are ______ speculation and vacancy tax exemptions
1) principal residence exemption
2) rental exemption
3) non-arm lengths tenant
4) major home renovations and life events
SVT Exemption: Principal Residence Exemption
Live in the home full time and the home is the principal residence for the calendar year
SVT Exemption: Rental exemptions
The property must be occupied by a tenant for at least 6 months of the year, in increments of 1 month or longer
SVT Exemption: Arms length
Rental exemption in respect of a non-arm’s length tenant, so long as the residence is the tenants principal residence
SVT Exemption: Major home renovation and life events
Such as death, divorce, bankruptcy
Foreign owners and members of satellite families can claim a tax credit = ___% of any income earned in BC
20
EHT stands for what?
Empty home tax
The empty home tax will be applicable if the property is unoccupied for ____________ of the year or more will be subject to a ___% EHT
Six full months (6)
3%
The empty home tax will be applicable if the property is used as a ______________ without a hotel or Bnb license
Short term rentals
The empty home tax will be applicable if the rental period is shorter than _____
30 days
An exemption to the empty home tax are properties which are rented out for at least _________ in a row for a minimum of _________ in aggregate over the court of a year
30 days
Six months
An exemption to EHT is if the property is being used as a principal residence by the owner, a family member, or a friend for at least ______________________
6 months of the year
True or false… If you file an objection to pay GST and it is affirmed by an appeals officer at the CRA, you have exhausted your options in terms of appealing the assessment
False!!
Kale is purchasing a new home and pays a $75,000 deposit to the seller on March 15. The closing date for Kale‘s purchase is July 1. What are Kales GST obligations?
Kale must pay GST on the $75,000 deposit once the closing occurs, and the full amount of the sale price including the deposit becomes taxable
True or false… If the seller receives an assessment from the Canada revenue agency for the amount of the GST after failing to collect it from the buyer, the seller has lost his or her ability to pursue the buyer for the amount of the tax and will be held for the liable for that amount
False!!
Which of the following statements about the property transfer tax is true
The property transfer tax applies to any transfer of an interest in real property that is registered at the land title office, unless the transferor can rely on an exemption from PTT
Which one of the following statutes affects the real property taxation system in BC
The school act
Which one of the following statues in BC that provides a copperhensive explanation of the property tax system
In BC there is no single statue that can explain the tax system comprehensively
When will BC assessment mail assessment notices to property owners
At the end of December
It is January 6, and Mike had just received an assessment notice on his home. The assessment value of the property is shown a $600,000 which represents the value of the property as of
July 1 of the previous year
Which one of the following statements best describes the difference between an assessment notice and a tax notice
A tax notice as a request for money, while an assessment notice is not
Who may claim homeowners grant?
The owner – occupier of a property
What would make a property owner eligible to apply for deferral of real property taxes
The property owners 55 years of age and over
An appeal an a point of law regarding a real property assessment value can be made from the property assessment appeal board directly to Who?
BC Supreme Court
