Transfer of a principal residence

When a principal residence is transferred within a family, the transfer may qualify for a full or partial property transfer tax exemption. In relation to the person who previously owned it, you must be one of the people named in the definition of related individual.

For these exemptions, you must also be either a Canadian citizen or a permanent resident as defined in the Immigration and Refugee Protection Act (Canada).

A property is a principal residence for these exemptions if:

• Before the transfer, either the previous owner or you (the transferee) have resided in and used the property as their or your home (usually for a six-month period, but this may vary)
• The improvements on the property are designed and used to accommodate 3 or fewer families

A person can only have one principal residence at a time.

These exemptions also apply to a partial interest in such a building.

These exemptions do not apply to:

• Tax on the improvements classified as not residential by BC Assessment
• Tax on the portion of the land larger than 0.5 hectares (1.24 acres)

In these cases, you can still claim an exemption for the improvements classified as residential and the portion of land that is 0.5 hectares or less.

To claim a partial exemption, choose the code that would otherwise apply, and calculate the value of the partial exemption based on the formula below. (Reference: Section 15 of the Property Transfer Tax Act)

Full exemptions

For information on the transfer of a principal residence to the Public Guardian and Trustee, see Exemptions for Transfers to and from Trust Companies or the Public Trustee (PTT 010) (PDF, 160KB).

Partial Exemptions

To calculate the amount of a partial exemption, you may calculate the property transfer tax payable on the full market value (FMV) of the taxable transaction as if it were not exempt and subtract the tax on the adjusted value.

The adjusted value is determined by using the formula:

FMV of the taxable transaction – FMV of the interest in residential improvements – (FMV of the land transferred × [0.5 hectares/total area of the parcel])

If necessary, omit the value of the non-residential properties.

Partial exemption calculation examples

Example 1

You acquire 100% interest in a principal residence. The property is fully residential and is on 2 hectares. The property’s FMV is $700,000. The improvements’ FMV is $200,000.

The partial exemption is $6,500.

The property transfer tax payable is $5,500.

To calculate the partial exemption amount, you apply the following steps:

Step 1: Calculate the property transfer tax payable on the property’s FMV as if the transfer were not exempt

Tax payable on $700,000 FMV is $12,000.

Step 2: Calculate the adjusted value

The adjusted value is:

$700,000 (FMV of the property) – $200,000 (FMV of residential improvements) – ($500,000 (FMV of land) × [0.5/2])) = $700,000 – $200,000 – $125,000 = $375,000

The adjusted value is $375,000.

Step 3: Calculate the property transfer tax payable on the adjusted value

Tax payable on the adjusted value of $375,000 is $5,500.

Step 4: Calculate the partial exemption amount

The tax payable on the taxable transaction as if not exempt, calculated in Step 1 minus the tax payable on the adjusted value calculated in Step 3. 

The partial exemption is for $6,500.

Step 5: Calculate the amount of the property transfer tax payable

The tax payable on the taxable transaction, calculated in Step 1 minus the partial exemption amount calculated in Step 4.

The property transfer tax payable is $5,500.

Example 2

You acquire 50% interest in a principal residence. The property has residential and non-residential classed improvements and it is on 0.2 hectares.  

The property’s FMV is $700,000:  

• The residential improvements’ FMV is $200,000
• The non-residential improvements’ FMV is $100,000
• The land’s FMV is $400,000

The partial exemption is $11,000.

To calculate the partial exemption amount, you apply the following steps:

Step 1: Calculate the property transfer tax payable on the property’s FMV as if the transfer were not exempt

The taxable transaction’s FMV (i.e., 50% X $700,000) is $350,000.

Tax payable is $5,000.

Step 2: Calculate the adjusted value

The adjusted value is:

50% (interest acquired) × [$700,000 (FMV of the property) – $200,000 (FMV of residential improvements) – $400,000 (FMV of land transferred)] = 50% × [$700,000 – $200,000 – $400,000].

The adjusted value is $50,000.

Step 3: Calculate the property transfer tax payable on the adjusted value

Tax payable on the adjusted value is $500.

Step 4: Calculate the partial exemption amount

The tax payable on the taxable transaction as if not exempt, calculated in Step 1, minus the tax payable on the adjusted value calculated in Step 3. 

The partial exemption is for $4,500.

Step 5: Calculate the amount of the property transfer tax payable

The tax payable on the taxable transaction, calculated in Step 1 minus the partial exemption amount calculated in Step 4.

The property transfer tax payable is $500.

For more examples, see Calculation examples for the property transfer tax.

Part interest is transferred from related individuals

If the total interest acquired is not all from a related individual, an exemption can be claimed on the part transferred from a related individual. 

To claim an exemption in this circumstance, select the applicable principal residence exemption code on the property transfer tax return. Use the exemption of General PTT (Override) line in the Tax Calculation section of the return to claim part exemption. 

Examples of using a part exemption

Example 3

Margaret, Leanne and Theo each owns one third of the subject property. Margaret is Leanne and Theo’s mom and lives on the property as her principal residence. Leanne and Theo are siblings.

The family decides to add Jenaya, Theo’s wife, to the title. Each owner transfers an 8.33% interest to Jenaya. Now each original owner and Jenaya owns a 25% interest in the property. Jenaya can claim an exemption for Related Individual – Principal Residence for the 8.33% transferred from each of Margaret and Theo. Jenaya needs to pay property transfer tax on the 8.33% interest transferred from Leanne because they are not related individuals. 

The property is fully residential and is on 0.2 hectares. The property’s FMV is $700,000.

Step 1: Calculate the property transfer tax payable on the property’s FMV as if the transfer were not exempt

The taxable transaction’s FMV (i.e., 25% × $700,000) is $175,000.

Tax payable is $1,750.

Step 2: Calculate the part exemption amount

On the 16.67% transferred from related individuals. The exempt part (25% – 8.33%) × FMV ($700,000) is 116,690. The exemption amount at 1% tax rate is $1,166.90.

Step 3: Calculate the amount of the property transfer tax payable

The tax payable on the taxable transaction, calculated in Step 1, minus the part exemption amount calculated in Step 2.

The property transfer tax payable is $583.10.

To claim this exemption, Jenaya will select exemption 05 – Related Individual – Principal Residence on the property transfer tax return. In the Tax Calculation section of the return, Jenaya will record the part exemption amount ($1,166.90) on the Exemption of General PTT (Override) line.

Net interest increase

Example 4

Sandra and Patrick are spouses and each owns 25% of the subject property. Jennifer and Robert, the daughter and son-in-law, also each own 25% of the property. All four owners live on the property as their principal residence. The property is less than 0.5 hectares and is entirely residential.

Now, Jennifer and Robert divorce and Robert removes his name from the title. The remaining three owners will each own 33.33% of property.

Sandra’s interest increases from 25% to 33.33% because she acquires another 8.33% interest in the property from Robert. Similar to Sandra, Patrick and Jennifer register an 8.33% increase in their interest of the property.

Sandra, Patrick and Jennifer file a property transfer tax return. Each transferee reports a purchase of their 8.33% interest in the property and claims a full exemption. No tax is payable.

To claim this exemption, select exemption 05 – Related Individual – Principal Residence on the property transfer tax return.