British Columbia’s Speculation and Vacancy Tax: Who Does It Affect?
What is the Speculation and Vacancy Tax Act?
The Speculation and Vacancy Tax Act introduces a new tax on owners of residential properties within specified areas of British Columbia. The Act received Royal Assent on November 27, 2018, making it applicable for the 2018 tax year and subsequent years moving forward. The tax is designed to prevent housing speculation, turn empty homes into good housing for those living in British Columbia, as well as gathering additional taxation revenue that will go towards affordable housing.
The good news is that more than 99% of British Columbians are expected to be exempt from the tax (as stated on the Government of British Columbia website). Despite this, all residential property owners in the applicable regions must complete a declaration, even if the owner is eligible for an exemption.
An important feature for all Canadian citizens and permanent residents is that they will be taxed at a single rate, while foreign owners and satellite families will continue to pay more. A definition of satellite families, provided by the Government of British Columbia, is described as “an individual or spousal unit where the majority of their total worldwide income for the year is not reported on a Canadian tax return”.
All residential property owners in the applicable regions must complete the declaration. In the event there are multiple owners of a home, a declaration must be completed by each owner. If a declaration is not completed, the Act contains various penalty provisions including fines, possible imprisonment or both.
How much can I be taxed?
For 2019 and onwards, the tax rate will be dependent on your place of residence. For BC residents, the rate will be 0.5% of your home’s assessed value for the 2019 tax year and subsequent years. Foreign owners and satellite families were taxed 0.5% for 2018 only, but will be increased to 2% in 2019 and subsequent years.
If a property has multiple owners, the tax will be divided among the owners based on their share of ownership. For example, if you and your partner are 50/50 owners of a property in a taxable region, you will each owe tax on 50% of the assessed value of the home.
Where are the Applicable Regions?
The regions affected by the Act are:
- municipalities in the Capital Region District (CRD) – excluding: Salt Spring Island, Juan De Fuca Electoral Area, and the Southern Gulf Islands;
- municipalities in the Metro Vancouver Regional District – excluding: Bowen Island, the Village of Lions Bay, and Electoral Area A, but including UBC and the University Endowment Lands;
- the city of Abbotsford;
- the city of Chilliwack;
- the district of Mission;
- the cities of Kelowna and West Kelowna;
- the city of Nanaimo; and
- The district of Lantzville.
In addition to the above regions, reserve lands, treaty lands, and lands of self-governing Indigenous Nations are not part of the taxable regions. The Government of British Columbia has also decided to exclude various residential properties. These include residential properties owned by:
- an Indigenous Nation;
- municipalities, regional districts, governments, and other public bodies;
- registered charities;
- housing co-ops; and
- certain not-for-profit organizations.
Am I Exempt?
In 2018, most British Columbians will be exempt from the tax if they either live in the home as their principal residence or the property is rented for at least three (3) months out of the year. Short term rentals of less than one (1) month do not count towards the three (3) month total.
For 2019, over 99% of British Columbians will continue to be exempt from the tax. A home that is not a principle residence must be rented for at least six (6) months per year to be exempt from the tax. However, short-term rentals for periods of less than one (1) month do not count towards the six (6) month total.
Do I qualify for a tax credit?
If you’re not eligible for an exemption, you may qualify for a tax credit.
British Columbian owners are eligible for a tax credit of up to $2,000on a secondary property. This means an owner of a home assessed at up to $400,000, who would otherwise pay the tax, will be exempt, since the value of the tax credit is equal to or more than the amount they would owe. This also means an owner of a home assessed at above $400,000 will only pay tax on the amount over $400,000. For example, for a $500,000 property, the owner will only pay tax on $100,000.
The credit is limited to $2,000 per owner and $2,000 per property (in the case of multiple owners) per year. The tax credit cannot be carried forward or transferred to a spouse.
Foreign owners and satellite families will be able to claim a tax credit equal to 20% of their BC income to reduce the 2% speculation and vacancy tax owing.