Real Property Transfer Tax in Prince Edward Island
As of Oct. 1, 2016, the 1% real property transfer tax in Prince Edward Island has been eliminated for all qualifying first-time homebuyers. If you are not a first-time buyer, you have to pay this tax unless you qualify for one of the other exemptions.
Deed of Conveyance
A deed of conveyance is a legal document showing the deed or title of a property has been transferred. When you buy real property, both you and the seller sign this document and register it with the provincial government. If you register a deed of conveyance in Prince Edward Island, you must pay RPTT on the purchase.
For the purposes of RPTT, real property includes land and buildings, but it also includes bulk storage tanks and supply lines, as well as wires, cables, pipes, towers, and equipment other than buildings that form part of a TV broadcasting, phone, or electric power distribution system.
Real Property Transfer Tax
RPTT is 1% of the property’s sale price or assessed value, whichever is higher. For example, if you purchase a home in Prince Edward Island for $300,000, you owe $3,000 in RPTT. Similarly, if someone gives you a home for free but its assessed value is $200,000, the RPTT is $2,000. However, there are several exemptions, and if you qualify for one of them, you don’t have to pay this tax.
First-Time Homebuyer Exemption
To qualify for this exemption, you must be a citizen or permanent resident of Canada and at least 18
years old. The property must be your first home, and you must be planning to use it as your principal residence. If you have claimed any first-time homebuyer exemptions in the past or held a registered interest in real property, you do not qualify for this exemption.
Finally, you must meet one of these three criteria:
- You lived in Prince Edward Island for at least six months before buying the home
- You paid tax in Prince Edward for two of the last six tax years
- You lived in the property for at least six months after the registration of the deed
To claim the exemption, fill out and submit the Declaration for First-time Home Buyers form. This form must be signed by a notary public, and you must sign an oath that you meet all of the criteria for the exemption. All buyers must meet these criteria to qualify. If you qualify for the exemption but the other buyer doesn’t, you still have to pay RPTT.
First-Time Homebuyer RPTT Refund
If you qualify for the first-time homebuyer exemption by living in the home for six months after purchasing it, you do not receive your RPTT exemption immediately. Instead, you must pay the tax when you register the deed, and then apply for a refund later. To obtain the refund, you must live on the property for at least 183 days and have met all of the other criteria at the time of purchase. To apply, fill out the Request for Refund of Real Property Transfer Tax form and the Declaration for First-time Home Buyers form, and submit these forms to the Taxation and Property Records division of Finance, Energy and Municipal Affairs in Prince Edward Island.
Price Limits for First-Time Buyers
Prior to 2016, Prince Edward Island capped the exemption for first-time homebuyers at $200,000. If you bought a first home for $500,000, you were exempt from paying RPTT on the first $200,000 but had to pay the tax on the remaining $300,000 of the home’s value, bringing your tax bill to $3,000. As of October 2016, that cap has been eliminated.
Low Cost Exemption
If the property you are buying is worth $30,000 or less, you qualify for the low cost exemption for RPTT.
To qualify, attach an Affidavit of Purchase to your deed of conveyance, and sign an oath noting the assessed value or purchase price of the property.
Inter-Family Transfer Exemption
If you receive property from a relative, you may qualify for the inter-family transfer exemption. The original owner of the property must be related to you or your spouse or common-law partner as a parent, spouse, grandparent, child, sibling, or step-sibling. Additionally, the transfer must be made without consideration, meaning no money over $1 can exchange hands. You may apply for this exemption with a Declaration of Inter-family Transfer form.
There are additional circumstances where Prince Edward Island offers RPTT exemptions. In particular,
select estate, corporate, or trust transfers are exempt, and the clarifying rules on these potential exemptions are detailed in Section 4 of the Real Property Transfer Tax Act. Additionally, if you transfer property to the Crown, a municipality or a nonprofit organization, these transfers are also exempt. Finally, if you transfer property due to a breakdown in your marriage, you are exempt from RPTT.