Prince Edward Island First-Time Buyer Exemption and the 183-Day Rule

Buying your first home in Prince Edward Island comes with a tax most buyers do not see coming: Real Property Transfer Tax, charged when the deed is registered. For a first-time buyer, the province offers an exemption that can remove that tax, but it comes with conditions that continue after closing day.

This article walks through who qualifies, the paperwork you sign before closing, and how the 183-day rule works. Your own situation may have wrinkles, such as a co-buyer who has owned before, so it is worth confirming the details with a lawyer before you close.

This article covers the law of Prince Edward Island.

What the transfer tax is and what the exemption removes

Real Property Transfer Tax in Prince Edward Island is 1% of the greater of the purchase price and the assessed value of the property. You pay on whichever figure is higher, measured when the deed is registered. The assessed value is the value from the current assessment roll at that time.

For a first-time home buyer who meets the criteria in the Act, the tax is waived. That can be a meaningful saving on closing day, which is why the conditions matter so much.

Who qualifies as a first-time home buyer

The tax is waived only for a first-time home buyer who meets the criteria in the Act. The province sets out specific conditions.

• You must be a Canadian citizen or a permanent resident.
• You must not have used the first-time buyer exemption before.
• You must meet the PEI residency test set out in the Act.
• If more than one person is buying, all purchasers of the property must qualify as first-time home buyers to get the exemption.

The last point catches many couples and family members buying together. If one buyer does not qualify, the exemption is not available for that purchase. Ask a lawyer how it applies if your co-buyer has owned property before.

The notarized declaration

To claim the exemption, you complete the Declaration – First-time Home Buyers form. It must be signed before a notary public or a commissioner for taking affidavits. Government forms for Real Property Transfer Tax are listed on a forms page maintained by the province.

Plan for this early. Because the declaration has to be signed before one of those officials, it is far easier to arrange that well before the closing date than on it.

The 183-day rule

The exemption is tied to actually living in the home. A first-time buyer who does not live in it as a principal residence for 183 consecutive days after registration must pay the tax that would have been payable at registration.

There is also a refund route. 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. You use the Request for Refund of Real Property Transfer Tax together with the notarized declaration.

Things like renting the home out, a job move or a delayed move-in can affect this rule. How the rule applies to your particular facts is worth confirming with a lawyer.

What to do next

• Confirm that every person on the deed qualifies as a first-time home buyer.
• Gather proof of citizenship or permanent residence.
• Ask your lawyer whether you meet the PEI residency test in the Act.
• Arrange to sign the declaration before a notary public or commissioner for taking affidavits.
• Check the offer's assessed value against the purchase price, since tax applies to the greater of the two when the exemption is not available.
• Mark your calendar for 183 days after the deed date and keep records showing the home is your principal residence.

If your circumstances are unusual, such as a purchase with a family member or a planned move-in date well after closing, speak with a lawyer before signing the agreement.

Frequently asked questions