Municipal governments raise most of the money needed for local services from property tax. It is collected from homeowners who pay the property tax directly to the municipal government. The amount of property tax depends on where a person lives and the value of their property. Different tax rates exist for different types of property; for example it is normal to pay a lower tax rate on residential property than commercial property.
Tenants in rented accommodation do not pay property tax directly; landlords and homeowners pay property tax to the municipality.
Property tax rates vary between the provinces and between municipalities. Some provinces offer schemes, rebate or deferment programmes to assist low income homeowners, seniors, disabled people and young families.
Property taxes are based on property valuations which are normally carried out by a central agency for the entire province. All provinces in Canada have their own assessment boards. Properties are assessed at their market value and these valuations are then given to the relevant municipalities who apply the appropriate tax rate to that property. Tax rates are normally determined annually and vary according to the type of property (residential, commercial, industrial).
Property tax levy usually includes rates defined by several institutions, and funds from the tax will eventually go to different authorities. A portion of property tax, for example, funds provincial schooling, so several municipal and provincial authorities are involved in setting the combined rate. For this reason, property tax calculations can be complex, and exact rates and modes of calculation differ between municipalities.
Property tax is paid directly to the local authority or municipality. It is normally calculated as an annual fee, which in most provinces can be paid monthly or spread out across the year. Penalties may be applied by municipalities for late payment, and houses with unpaid property tax can be auctioned off after a certain time period. Check with local municipalities for payment methods.
A Property Transfer Tax or fee on land transfer must be paid when a house is purchased. This is normally between 0.5 percent and 2 percent of the total property's value but is not applicable in all provinces. For persons buying their first property, exemptions apply from paying this tax. However, conditions apply; the buyer must be a Canadian citizen or permanent resident and it must be the buyer's first property bought anywhere in the world. There are other conditions which apply to enable qualification for this tax exemption; it is advisable to consult a lawyer for details. This tax is often informally referred to as the "welcome tax".
GST, HST and/or PST are applicable to the purchase of a new home but are often included in the quoted sales price. New homes costing C$350,000 or less can sometimes apply for a partial rebate of the 5 percent GST if the home will be the buyer's primary residence. Typically houses above C$450,000 and those on resale do not qualify for the GST rebate.
HST/PST is also applicable to any costs and fees associated with the purchase of a property.
This is not applicable to a resident's or Canadian citizen's primary residence. Non-residents are liable to pay capital gains tax on the sale of any property. Tax treaties between countries such as the US and UK are in place to prevent tax being paid twice by non-residents.
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