This page is an overview of the taxes that commonly come up when commercial property sells in British Columbia. It is not tax advice. How each tax applies depends on who owns the property, how it was used, how the deal is structured and your own tax history. Talk to your accountant and lawyer before you sign, because some choices cannot be undone after closing.
Who pays what: a quick map
| Tax | Who generally bears it | Main source |
|---|---|---|
| GST on the sale of commercial real property | Buyer pays; seller collects, unless a registered buyer self-assesses | CRA Memorandum 19.4.1 |
| BC property transfer tax | Buyer, on registration at the Land Title Office | gov.bc.ca |
| Income tax on capital gains | Seller | CRA Guide T4037 |
| Recapture of capital cost allowance | Seller, if depreciation was claimed on the building or equipment | CRA Guide T4037 |
| Annual property tax | Owner of record; usually adjusted between buyer and seller at completion | gov.bc.ca |
GST on the sale
The CRA's position is that "a supply by way of sale of commercial real property is generally a taxable supply whether the property is new or used" (CRA GST/HST Memorandum 19.4.1). BC is not one of the HST provinces, so the 5% federal GST applies rather than HST (CRA GST/HST rates).
Who actually sends the tax to the CRA depends on the buyer. When the buyer is registered for GST/HST, the seller is generally not required to collect the tax, and the buyer self-assesses and remits it instead (CRA). Baker Tilly explains that this self-assessment applies where the registered buyer intends to use the property primarily in commercial activities, and that it does not apply where the buyer is not a registrant or will use the property mainly in exempt activities. Registered buyers who cannot use the self-assessment rules may have to remit the tax with form GST60 (Baker Tilly, Dec 2022).
Because the seller remains responsible for deciding whether to charge tax, purchase contracts for commercial property commonly deal with GST in writing, including the buyer's GST registration number and a declaration from the buyer. Some sales are exempt. The CRA memorandum refers to exemptions in Schedule V of the Excise Tax Act, including certain sales of farmland to related persons, which are covered in a separate memorandum (CRA). Whether your sale is taxable, exempt or partly each is a question for your accountant.
BC property transfer tax
When someone buys or gains an interest in property registered at the Land Title Office, they must file a property transfer tax return and pay the tax unless an exemption applies (gov.bc.ca). The tax is based on fair market value at registration. The general rates are:
- 1% of fair market value up to and including $200,000
- 2% of fair market value over $200,000 and up to and including $2,000,000
- 3% of fair market value over $2,000,000
A further 2% applies to the residential portion of a property worth over $3,000,000. On a mixed-class property, such as residential and commercial, the further 2% is charged only on the residential portion. Where land is classed as farm only because of an owner's or farmer's dwelling, up to 0.5 hectares is treated as residential for this purpose. The additional property transfer tax for foreign nationals, foreign corporations and taxable trustees also applies only to the residential portion within specified areas (gov.bc.ca).
Worked example, general rate only: a purely commercial property registered at a fair market value of $3,000,000 would attract $2,000 (1% of the first $200,000) plus $36,000 (2% of the next $1,800,000) plus $30,000 (3% of the last $1,000,000), for $68,000 in total. The province publishes its own calculation examples, and a lawyer or notary will confirm the figure for an actual transfer.
Property transfer tax is technically the buyer's cost, but sellers feel it too, because buyers factor it into what they can offer. Structures that avoid a land title registration, such as buying the shares of the company that owns the property, have their own tax consequences and have been contested; in 2024 the Province of BC was in court over an insolvency sale structure that avoided the tax (Canadian Lawyer). Structure is legal and tax advice territory, not a do-it-yourself decision.
Capital gains and recapture
For income tax, a commercial property is usually two assets: land, which is not depreciable, and a building, which is. The CRA says that for each property sold that includes land and a building, you must "determine how much of the selling price relates to the land and how much is for the building" and report them separately (CRA T4037). Equipment sold with the property may be treated separately again.
- Capital gainThe amount by which the proceeds for a capital property exceed its adjusted cost base and selling costs. The inclusion rate is one-half. The federal government announced on March 21, 2025 that it would cancel the proposed increase in the inclusion rate (Prime Minister's Office).
- RecaptureIf capital cost allowance was claimed on the building and the sale leaves a negative balance in its class, the CRA treats that negative amount as "a recapture of capital cost allowance" that is included in income (CRA).
- Terminal lossIf a balance remains in the class after you no longer own any property in it, a terminal loss may be deductible (CRA).
Because recapture and capital gains are taxed differently, the split of the price among land, building and equipment can matter to both parties. Discuss the allocation with your accountant before the contract is finalized, so the agreement reflects it.
Farm property considerations
Agricultural and greenhouse properties raise extra questions. The lifetime capital gains exemption for qualified farm or fishing property is $1,250,000 for 2025 dispositions, and the limit is indexed to inflation (CRA Line 25400); the government confirmed in March 2025 that this higher limit would be kept (Prime Minister's Office). Whether a property is "qualified farm property" depends on detailed ownership and use tests that an accountant needs to review. The CRA's guidance for farmers is a good starting point for questions to ask (CRA – Capital gains and losses for farmers and fishers).
Do not assume that a cannabis facility counts as farm property for any purpose. For property assessment, BC Assessment states that cannabis production does not qualify for farm classification, effective the 2019 assessment roll (BC Assessment). Income tax tests are separate, and depend on facts. For land-use questions, see ALR and farm classification.
BC Assessment classes and property tax
BC Assessment places every property in one or more of nine classes: 1 Residential, 2 Utilities, 3 Supportive Housing, 4 Major Industry, 5 Light Industry, 6 Business and Other, 7 Managed Forest Land, 8 Recreational Property/Non-profit Organization, and 9 Farm (BC Assessment). A property with several distinct uses can fall into more than one class. Class and assessed value are the basis for annual property taxes (gov.bc.ca), and property taxes for the year of sale are normally adjusted between buyer and seller on the statement of adjustments at completion.
Classification also matters for the property transfer tax calculation above, because the further 2% and the additional tax apply only to residential portions.
Questions to take to your accountant
- StructureShould this be an asset sale or a share sale, and what are the tax results of each?
- GSTIs the sale taxable, and is the buyer a registrant who will self-assess?
- AllocationHow should the price be split among land, building and equipment?
- RecaptureHow much capital cost allowance has been claimed, and what recapture could result?
- ExemptionsCould any capital gains exemption apply, and what records prove it?
- TimingDoes the closing date affect which tax year the gain falls in, and does that matter?
How Sean can help
Sean Phillips, REALTOR® with Coldwell Banker Executives Realty, sells commercial, industrial, agricultural and cannabis properties anywhere in British Columbia. He does not give tax advice, but he can get the market information your accountant and lawyer need, including pricing evidence and the buyer pool, early enough to plan. Paid consulting on facility condition or conversion is quoted per site. See selling commercial property in BC, consulting, or contact Sean.