Buying Real Estate in Whistler
Information Provided Courtesy of Steve Turner, Ardaugh, Hunter, Turner.
Property Transfer Tax (PTT)
Legal Fees and Disbursements
What is HST and how does it affect the purchase of your home?
How does HST work?
The Harmonized Sales Tax is a 12% federal tax which in many countries is a "hidden" tax paid for by the manufacturer of goods and the provider of services and then added on to the cost of the goods or services by the seller, so that the end price would be the same: in one case, as a "hidden" tax, the tax is added in before the final sale, and in the case of a value added tax such as the HST, the tax is added at the point of sale. In Canada, it is no longer "hidden" but is a value added tax and in the case of real estate, it applies to the purchase of new construction and on the resale of accommodations that have been rented out for short term/nightly rentals.
The payment of HST can be deferred if the new purchaser is going to continue to offer the property for short term or nightly rental for 90% of the time and becomes a HST registrant. Becoming a HST registrant is a straightforward procedure of completing four forms. Once you are a HST registrant, you are entitled to claim credits for the HST that you pay, for example on legal fees, property management fees, and utilities such as electricity, gas, cable and telephone. You are then required to charge, collect and remit HST on the nightly rentals, which in some cases may be done through your property manager. You will be required to file an annual HST return as well.
HST on New Homes
When you buy a newly constructed home, condominium or townhouse, the entire purchase price including land is taxable. If the home is going to be your primary place of residence, it may qualify for a partial HST rebate, depending upon the sale price. If the property is to be rented to tenants, the full 12% HST is charged on the purchase price. The HST rebate is only available on homes lower than approx. $450,000 and even then a sliding scale is applicable to homes over $350,000.
HST on Resale Homes
There is no HST on the purchase price of a used residential property that has been occupied as a residence before you bought it. Used residential property includes an owner occupied house, condominium, apartment, summer cottage, vacation property or non-commercial hobby farm.
Used property can also mean a recently built house that is substantially complete and has been sold at least once before you buy it.
HST and Real Estate Deals
HST applies to most of the services provided in completing a real estate transaction. For example, 12% HST is applied to the real estate commission. The person responsible for paying the commission - usually the vendor, pays the tax. HST applies to many other services involved in real estate transactions.
Whistler Association Fees
Phase One and Phase Two Covenants
Should I Buy in My Name or in the Name of the Company?
A. Corporations may pay tax on income received from the property at significantly higher rates than individuals (depending on the individuals marginal tax rates);
B. Corporations can pay higher capital gains tax as well;
C. Should you incorporate a company specifically for the purposes of acquiring a property you will have additional legal cost of incorporating the company for approximately a $1,000.00 plus additional costs associated in maintaining the company annually such as filing annual reports, registered and records office charges and accounting charges;
D. If the company is from a jurisdiction outside of British Columbia, your mortgage lender may require that the company be registered within British Columbia prior to agreeing to lend money (the cost associated with doing so would be roughly as outlined in the proceeding paragraph);
E. In the event that the company was not required to register within British Columbia prior to completing the transaction, a Certificate of Good Standing would be required from the incorporating jurisdiction and an Opinion Letter from a solicitor from the incorporating jurisdiction would be required in conjunction with any mortgage financing;
F. Prior to any sale of the property a further certificate of Good Standing would be required from the incorporating jurisdiction and it will be necessary to maintain the company in the incorporating jurisdiction as long as the property is owned;
G. Personal guarantees of the principals of the company will usually be required by the mortgage lender even though the property is owned by a limited company.
The advantages of having the property held by an incorporated entity would include the following:
A. In the event of the death of the principals of the company there would be no change of ownership of the property in the British Columbia Land Title system, and if the shares are held outside of British Columbia there would not be any probate fees payable in conjunction with the shares;
B. If the only asset that the company owns is the property, it may be possible to sell to a Purchaser the shares in the Company thereby avoiding the payment of Property Transfer Tax and GST on a sale of the property (Purchasers may be reluctant to purchase shares as they would inherit any liabilities in the company including any monies owing to Revenue Canada).
Of A Particular Note to Non-Residents of Canada
Withholding Tax on Rental IncomeRevenue Canada Taxation requires nonresidents to pay twenty-five percent (25%) of the gross rental income from the property to Revenue Canada. You may obtain exemption from such withholding tax if you complete a government form called an NR6 setting out that the projected income is less than the anticipated expenses associated with the property. Most property managers will assist in the completion of the NR6 return. Upon having filed an NR6 return, you are obligated to file an annual tax return with respect to the property with Revenue Canada. Revenue Canada will only allow expenses to be claimed if the returns are filed and will disallow any expenses incurred more than two years prior to the time of filing the return, it is therefore important that the returns are kept current to avoid expenses being disallowed and tax being paid on the gross rental income.
(A) The Mortgage is for a fixed term, typically between six months and five years. At the end of the fixed term, the interest rate is renegotiated.
(B) During the fixed term, there are limited rights to repayment, typically ranging from 10 to 20 percent.
(C) In the event that you wish to prepay more than the permitted amount, and in the event of a sale of the property, penalties would apply and typically are the greater of three (3) months' interest or the interest rate differential.
Execution of Mortgage Documents
Methods of Payment
It is possible to wire funds directly to the solicitor's trust account; however, because of the routing of funds, it can sometimes take several working days before funds wired will actually appear in the solicitor's trust account for the closing.
It is recommended that the Buyer open a bank account with a bank in Whistler to facilitate the payment in Canadian funds of ongoing expenses and the receipt of revenues from the property.
Our firm has Swift numbers which can be of assistance ensuring a speedy transmittal of funds.