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NEWS!! Speculation and Vacancy Tax

BC Speculation Tax

After more than a month of deliberation, the Bill 45 Act, the Speculation and Vacancy Tax Act, passed the third reading on November 22nd, 2018 and approved by the provincial government on November 27th, 2018.

It is important to note that the BC Speculation & Vacancy Tax is different to the BC Empty Homes Tax, which is a municipal levy in Vancouver. If you own residential property in Vancouver, you may have to pay both taxes

If you own a property in the Province of British Columbia, but do not pay any personal income tax, you will be required to pay a tax each year.

Designated area in BC for Speculation Tax 2018.

Designated area:

  • Capital Regional District (Greater Victoria Area)
  • Metro Vancouver Regional District, excluding Bowen Island, the Village of Lions Bay and Electoral area A, but including UBC and the University Endowment Lands
  • Abbotsford
  • Mission
  • Chilliwack
  • Kelowna and the City of West Kelowna
  • Nanaimo and the District of Lantzville
Find out if you apply.

The payment rules for the BC Speculation & Vacancy Tax is as follows:

2018:

  • Regardless of the type of owner you are, a tax value of a 0.5% of the property value, based on the BC Assessment Notice (valued on July 1st, 2018), will need to be turned over as the amount for speculation tax.

2019:

  • Foreign investors and satellite families need to pay 2% per year.
  • Satellite Families: A satellite family is an individual or spousal unit where the majority of their total worldwide income for the year is not reported on a Canadian tax return.
  • BC residents and other Canadian Residents, or permanent residents that are not members of a satellite family will be taxed 0.5% of the assessed property value.

Exemptions of the Speculation Tax

In particular circumstances, most BC residents will not need to pay for the Speculation Tax due to the fact that they either live in their primary residence, or they rent out their property.

Owner Principle Residence

  • An owner is generally exempt on their principal residence, which is the place where an individual resides for a longer period in a calendar year than any other place. This means that most people who own one home that they live in will be exempt.
  • People who have multiple homes must determine which home is their principal residence. Couples are generally deemed to have one principal residence for the purposes of the tax.
  • To be eligible for this exemption and the principal residence related exemptions below, an owner must be a Canadian citizen or permanent resident of Canada who’s a B.C. resident for income tax purposes and isn’t part of a satellite family

Rental Exemption

  • Rental exemptions are available for homes occupied by tenants. To qualify for an exemption, the home must be occupied for at least six months of the year in increments of one month or longer.
    • For 2018, tenants need to occupy for only three months in increments of one month or longer for the owner to qualify for this exemption.
  • Only one residence must be rented for the property to be exempt.
    • Arm’s-length rentals: All owners will be eligible for a rental exemption in respect of an arm’s-length tenant, so long as there is a written tenancy agreement in place under the Residential Tenancy Act and the tenant resides at the property. (An official Tenancy Contract must be in place!)
      • An arm’s-length tenant is a business-only relationship; anyone other than non-arm’s length tenant.
    • Non-arm’s-length rental exemption: Owners who are Canadian citizens or permanent residents of Canada, but not satellite families, will also be eligible for the rental exemption in respect of non-arm’s length tenant so long as the residence is the tenant’s principal residence.
    • Non-Canadians may be able to claim an exemption in respect of a non-arm’s length tenant in very limited circumstances.

Year of Acquisition Exemption

  • Owners are exempt in the year they purchase a property if the purchase attracted property transfer tax, or if the transaction was exempt from property transfer tax for one of the following reasons:
  • First-time home buyers’ exemption
  • Newly built homes exemption
  • Reversion, escheated or forfeited land exemption
  • Transfers to or from a trustee in bankruptcy
  • Transfer of land by Public Guardian and Trustee
  • Transfer to a veteran or veteran’s spouse

Please refer to the following link for the full detailed exemption list:

https://www2.gov.bc.ca/gov/content/taxes/property-taxes/speculation-and-vacancy-tax/exemptions-speculation-and-vacancy-tax#principal-residence

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