BC Speculation Tax – BC’s New Tax on Real Estate
If you own or are looking to own residential real estate in BC (a home, condo, or cottage) you should be aware of the BC government’s 30 Point Plan to address BC’s housing affordability.
Do you own a 2nd home or vacation property in BC?
Starting in 2018, the BC Speculation Tax, announced in the BC government’s February 20, 2018 budget, is levied annually and is intended to apply to unoccupied/vacant residential properties as part of the 30 Point Plan. It’s really a vacancy tax similar to Vancouver’s Empty Home Tax. If it was a speculation tax then it would be an extra tax (on top of income tax) only when the property is sold rather than every year.
What we know
The BC Speculation Tax is a retroactive and punitive tax, applies to unoccupied residential properties within the following areas of British Columbia:
Metro Vancouver (not Bowen Island),
Abbotsford, Chilliwack, and Mission, (not Cultus Lake),
Victoria and the Capital Region (not the Gulf Islands and Juan de Fuca),
Kelowna and West Kelowna and Nanaimo-Lantzville).
You’re exempt if:
The property is your primary residence;
It is rented out at least 3 months in 2018 and at least 6 months after that; each period for at least 30 days (Note: BC recently said that if you suite part of the residence and rent that part out for at least 3 months (6 months after 2018) then the whole residence may be exempt);
You or your tenant is “temporarily absent for work purposes”;
You’re in a hospital under medical care, long-term care or supportive care facility or you’re an executor and the estate is in the process of being administered; and
You’re a BC resident and the property is assessed at less than $400,000.
Speculation Tax Rate:
For 2018, 0.5% of assessed value
For 2019, 2% for foreign investors and satellite families; 1% for the rest of Canadian citizens and permanent residents who don’t live in BC. It stays at 0.5% if you are a living in BC (Canadian citizen or permanent resident but not a member of a satellite family).
What we don’t know yet
When will the new tax be due? The BC government says it will administer the tax outside of the property tax system and cycle and will send notices.
Who has to pay it if the property is sold – the seller or the buyer?
Satellite families (which have to pay the tax). If an Alberta family buys a condo for their daughter and son to go to UVic – do they have to pay rent for an exemption if the 2 students are considered a “satellite family”?
Can the 3 month (6 months after 2018) rental exemption straddle a calendar year?
Any exemptions for builders who sit on undeveloped land waiting for approvals? If they have to wait up to 2 years for approval before they can even begin construction then that cost gets passed onto the buyer; running contrary to BC’s mandate for more affordable housing. BC said it is working on this and will provide clarity before the summer (we haven’t heard anything yet).
*The BC government will provide much needed answers to these questions sometime this fall.
Property Transfer Tax
When you purchase or gain an interest in property that is registered at the Land Title Office, you’re responsible for paying property transfer tax and filing a property transfer tax return.
In most cases, property transfers are completed by a legal professional.
Taxable transactions include:
- transfer of fee simple
- right to purchase or agreement for sale
- lease or lease modification agreements
- life estate
- foreclosure
- Crown grant
- transfer as a result of corporate reorganization
You pay the tax based on the fair market value of the property (land and improvements) at the date of registration with the Land Title Office, unless you qualify for an exemption or purchase a pre-sold strata unit.
If you’re a foreign national, foreign corporation or taxable trustee, you also pay the additional property transfer tax on residential property transfers within specified areas of B.C.
Property transfers are routinely audited. If an audit determines you owe tax, you will receive a notice of assessment. You need to pay the balance shown on the notice to avoid additional interest.
If you disagree with the notice of assessment, you can file an appeal.
Property transfer tax should not be confused with annual property taxes. Annual property taxes are paid yearly for each property you own or have a registered interest in to fund services in your area, portion of the property.
Tax Rates
The property transfer tax rate is:
1% on the first $200,000,
2% on the portion of the fair market value greater than $200,000 and up to and including $2,000,000
3% on the portion of the fair market value greater than $2,000,000, and
If the property is residential, a further 2% on the portion of the fair market value greater than $3,000,000 (effective February 21, 2018).
If the property is classified as residential and farm, or is residential mixed class (such as residential and commercial), you pay the further 2% tax on only the residential portion of the property.
Effective September 17, 2018, under the Information Collection Regulation, individuals with a significant interest in a corporation or trust that acquires property may need to be identified on the property transfer tax return.
Empty Home Tax
In the City of Vancouver, properties deemed vacant will be subject to a tax of 1% of the property’s assessed taxable value.
Every owner of residential property will have to make a property status declaration each year. This will determine if the property is subject to the Empty Homes Tax, also known as the Vacancy Tax.