BC Speculation and Vacancy Tax
Everything You Need to Know About BC’s New Spec Tax
Written By: Mariko Baerg, REALTOR of Bridgewell Real Estate Group
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British Columbia has recently introduced a new Speculation and Vacancy Tax that may affect you if your own a home that is vacant or often vacant.
This blog explains what the BC Speculation and Vacancy Tax is, how it is calculated, exemptions, and other frequently asked questions.
For everything you need to know about the BC Speculation and Vacancy Tax – read on!
What is the Speculation and Vacancy Tax?
The Speculation and Vacancy Tax is a new annual tax that will hit owners of vacant homes or homes that are empty more than 6 months of the year as of 2019.
The government has stated that it is designed to ensure that foreign owners and satellite families are fairly contributing to B.C’s tax system.
In 2018, the tax rate is 0.5 per cent of your home’s assessed value, based on property owned Dec. 31, 2018. For 2019 and subsequent years, the tax rate is further broken down and calculated as 2% for foreign owners and satellite families and 0.5% for Canadian citizens or permanent residents of Canada who are not members of a satellite family
The BC Government has stated that over 99% of British Columbians will fall in to the exemption category for the Speculation and Vacancy Tax. If you are living in your principal residence, or are an owner of a property with tenants currently living in it then you will generally be exempt.
How is the Speculation and Vacancy Tax Calculated?
Now that we’re in to 2019 (time flies… it’s already February!), the speculation and vacancy tax rate varies depending on the owner’s tax residency and whether the owner is a Canadian citizen or permanent resident of Canada, or a member of a satellite family.
For 2019 and subsequent years, the tax rate is:
- 2% for foreign owners and satellite families
- 0.5% for Canadian citizens or permanent residents of Canada who are not members of a satellite family
The speculation and vacancy tax applies based on ownership as of December 31 each year.
Are there any tax credits if I have to pay?
Your calculation of tax credit depends on whether you are a B.C owner, foreign owner/satellite family, or non-resident.
Here’s a breakdown of the three categories and how credits are dealt with:
B.C. owners – B.C. owners are eligible for a tax credit of up to $2,000 on a secondary property. This means an owner of a home who has a home assessed at up to $400,000 and would otherwise pay the tax will be exempt. Why? Because the value of the tax credit is equal to or more than the amount they would owe. ($400,000 x 2% = $2000)
For B.C. homeowners, this means that if your home is assessed at or above $400,000 that you will only pay the tax for the portion of the assessed value greater than $400,000. For example, if you have a property worth $600,000 then you will only pay the tax on $200,000. ($600,000-$400,000 = $200,000)
There is a credit maximum of $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 – Foreign owners and satellite families can claim a tax credit equal to 20% of their B.C. income. The tax credit cannot reduce the tax rate below the rate for an equivalent B.C. resident (zero on a principal residence or 0.5% on other properties).
Unused B.C. income may be carried forward for up to two years or transferred to a spouse.
Other Canadians – Non-B.C. resident Canadians will be eligible for a tax credit based on their income claimed in B.C.
Similar to foreign owners and satellite families restrictions, the tax credit cannot reduce the tax rate below the tax rate for an equivalent B.C. resident; Unused tax credits may be carried forward for up to two years or transferred to a spouse; Tax credits are pro-rated in 2018 when the tax rate is 0.5% for all owners.
Do I have to Claim my Exemption?
Yes you have to claim your exemption by completing a declaration online or by phone. The easiest way to declare is online at gov.bc.ca/spectax, in which you will need your declaration code & letter ID (refer to the mailout sent by the government), your property address, and your social insurance number to confirm your identity.
Homeowners in taxable regions need to declare before March 31, 2019.
What are the taxable regions for the Speculation and Vacancy Tax?
The taxable regions include:
- Municipalities within the Capital Regional District, except Salt Spring Island, Juan de Fuca Electoral Area, and the Southern Gulf Islands.
- Metro Vancouver municipalities, except Bowen Island and the Village of Lions Bay.
- West Kelowna
- District of Lantzville
Within these areas, any reserve lands, treaty lands, or self-government First Nations are exempt.
If a property has joint owners, is each owner required to make a property status declaration?
For the Speculation and Vacancy Tax, if a property has more than one owner EACH OWNER MUST COMPLETE A DECLARATION. This is true even if the other owner is a spouse.
What if I am the co-owner of a taxable residential property?
If you own a property with a co-owner and you fall under the exemption but your partner does not, then you will still be exempt.
Exemptions are based on how each person uses each residential property. If you’re the co-owner of a residential property in a taxable region and are exempt, the other owner will still have to pay tax based on their percentage ownership of the residential property as listed with the Land Title Office.
How to avoid the tax
According to the provincial government, more than 99 per cent of British Columbians will be exempt.
Ask yourself – is your residential property your primary home? If the answer is yes, then great, you’re exempt.
Did you rent out the property for three months or more last year (2018)? You’re exempt.
As of 2019 the rules have changed and you’ll have to rent out a home that isn’t your principal residence for at least six months to avoid the tax. Do you plan to rent out the property for six months or more for 2019 and moving forward? If the answer is yes, then you’re exempt!
That’s it, go ahead and fill out your declaration. The government says the tax is designed to “target foreign and domestic speculators who own residences in B.C. but don’t pay taxes here.” It’s likely that if you don’t fall within that category then you will be exempt from the Speculation and Vacancy tax.
If I do have to pay the BC Speculation and Vacancy tax, when is the payment due?
If applicable, the payment is due by no later than July 2, 2019.
You will be able use our online payment system or you can also pay through your financial institution, by cheque, or in person at a Service BC centre.
If you are charged the speculation and vacancy tax but don’t pay what you owe, you may be charged a penalty and interest in addition to the amount of tax you owe.
(Don’t forget: The declaration deadline is March 31, 2019.)
Is the Empty Home Tax the same as the Speculation Tax and Vacancy Tax?
The City of Vancouver’s Empty Homes Tax is separate from BC’s Provincial Speculation and Vacancy Tax. If you are not exempt, it is possible that both taxes may apply to property in Vancouver. The Empty Home Tax only applies to properties that are located in the City of Vancouver where as Speculation Tax is provincial and applies to all properties located in taxable regions in BC.
The Speculation Tax declaration deadline is March 31, 2019.
The Empty Home Tax declaration deadline is February 4, 2019.
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