How Much Is Real Property Transfer Tax in Prince Edward Island?

You have agreed on a price for a home in Prince Edward Island, and now you are adding up the costs of closing. One of them is Real Property Transfer Tax, which is charged when the deed is registered in your name. Many buyers assume it is a simple percentage of what they paid, but that is not always how it works.

This article explains the rate, what the tax is actually based on, and the main exemptions. Your own numbers and circumstances can change the result, so treat this as a general guide and confirm the details with a lawyer before you close.

This article covers the law of Prince Edward Island.

The rate and what it is applied to

The Real Property Transfer Tax in Prince Edward Island is 1% of the greater of the purchase price and the assessed value of the property. That means you do not always pay on the price you negotiated. You pay on whichever figure is higher: the consideration (the price) or the assessed value at the time the deed is registered.

For this purpose, assessed value means the property's value taken from the current assessment roll at the time the deed is registered. So the value that counts is the one on the roll on the registration date, not an older figure you may have seen in a listing or an earlier tax notice.

A simple way to see how it works

Because the tax is 1% of the higher of the two figures, you can work out which number applies with a quick comparison. Put your price next to the assessed value from the current roll, and the larger one is the figure the tax is based on.

In the first row the price is higher, so the price is used. In the second row the assessed value is higher, so it is used instead, even though you agreed to pay less. Your lawyer can check the current assessed value and confirm the figure for your purchase.

The low-cost property exemption

No transfer tax is payable on a deed where the greater of the consideration and the assessed value does not exceed $30,000. In practice, a property is exempt only if both the price and the assessed value are $30,000 or less. If either one is above $30,000, this exemption does not apply.

The province lists this as a named exemption, the Low-Cost Real Property Exemption, under Real Property Transfer Tax. Whether it fits your purchase depends on both figures, so it is worth confirming with a lawyer.

The first-time home buyer exemption

The tax is waived for a first-time home buyer who meets the criteria in the Act, and all purchasers of the property must qualify as first-time home buyers to get the exemption. If you are buying with someone who does not qualify, the exemption is not available.

• You must be a Canadian citizen or permanent resident.
• You must not have used the first-time buyer exemption before.
• You must meet the Act's Prince Edward Island residency test.
• You complete the Declaration – First-time Home Buyers form, signed before a notary public or a commissioner for taking affidavits.

There is also an occupancy condition. A first-time buyer who does not live in the home as a principal residence for 183 consecutive days after registration must pay the tax that would have been payable at registration.

If you pay the tax at registration because the residency test was not yet met, you may apply for a refund after occupying the property as a principal residence for at least 183 days following the deed date. The application uses the Request for Refund of Real Property Transfer Tax plus the notarized declaration.

What to do next

• Find the current assessed value of the property and compare it with your price, since the higher figure is the one taxed.
• Work out whether both the price and the assessed value are $30,000 or less, which is the only case for the low-cost exemption.
• If you think you are a first-time buyer, check that every purchaser qualifies.
• Arrange to sign the first-time buyer declaration before a notary public or commissioner for taking affidavits.
• Ask your lawyer to confirm the tax figure and to make sure it is included in your closing costs.
• Keep the government forms for Real Property Transfer Tax handy; they are listed on a government forms page.

If anything about your situation is unusual, such as buying with a co-owner, a recent change in assessed value, or uncertainty about residency, speak with a lawyer before your closing date.

Frequently asked questions