B.C.’s Speculation and Vacancy Tax is here – What you need to know

What is the speculation and vacancy tax?

The speculation and vacancy tax was introduced by the B.C. provincial government in their 2018 provincial budget.   The tax applies to residential properties (not commercial properties) and if it applies will be payable by the legal owners of the property. The tax is applicable in only certain regions of B.C., notably Greater Vancouver, the Fraser Valley, Kelowna, West Kelowna, Nanaimo, District of Lantzville and the Capital Regional District.  The tax is geared towards satellite families (more than 50% of the spouses’ income is earned outside of Canada and not reported in Canada) and non B.C. residents who own a vacation property in B.C. 

Note: This tax is distinct from the City of Vancouver Empty Homes Tax.

Exemptions

B.C. residents who live in their principal residences and owners of properties with tenants are generally exempt from this specific tax.  There are various exemptions from the tax, including (but not limited to):

• Principal residence,
  • If multiple homes, the principal residence exemption only applies to the home lived in for the longest period of time in the calendar year.
  • Owner must be a Canadian citizen or a permanent resident of Canada who is a B.C. resident for income tax purposes.
• Properties with tenants,
  • The home must be occupied by a tenant for a minimum of six months of the year (three months in 2018).
  • Special rules applies to satellite families whose tenant is a relative.
• Strata hotel or accommodation properties (2018 and 2019 only),
• Vacant lot (2018 only),
• Property has rental restrictions due to a covenant or strata bylaw (2018 and 2019 only),
• In the year of purchase or inheritance,
• Properties under construction or renovation, if building activities are started or continued,
• Heritage properties under conservation renovations.

The exemptions identified above have numerous criteria that limit the circumstances where an exemption can be claimed.  For further details, please contact your Baker Tilly advisor or go to the Government of B.C. website which provides explanations and guidance on the exemptions available.

The exemptions listed above are not only applicable to individuals but can be claimed by corporations, partnerships, and trusts.   For a corporation and partnership, the individuals who have significant ownership and/or control of the corporation/partnership must meet the applicable requirements.  For a trust, the beneficial owner must meet the applicable requirements.

To claim the exemption, homeowners in the regions where the tax applies must register by completing a declaration online or by phone before March 31, 2019.  A declaration is not required to be completed if a residential property is located outside of the region where the tax applies. 

Tax rates

The speculation and vacancy tax rate varies, depending on factors such as the owner’s residency and citizenship, or where the owner is part of a satellite family.  This tax applies based on ownership as of December 31st of each year.

Tax rate for 2018:

• 0.5% of the property’s assessed value for all properties subject to the tax

Tax rate for 2019 and subsequent years:

• 2% for foreign owners and any owner who fails to file a declaration
• 0.5% for Canadian citizens or permanent residents of Canada who are not members of a satellite family

Tax payable = tax rate * (owner’s % interest * assessed value)

Required steps

All homeowners who own residential property on December 31st in the regions where the tax applies must complete an annual declaration for the speculation and vacancy tax.  Once a letter is received, homeowners will have the following two options to register their declaration:

• Online:              gov.bc.ca/spectax
• Telephone:        1-833-554-2323

Note: where there are multiple owners of a home, a declaration must be completed by each owner, including spouses.

In order to complete the declaration, the information needed for each homeowner includes:

• Letter ID – found on the declaration letter received in the mail;
• Declaration code – found on the declaration letter received in the mail; and
• Social Insurance Number of the individual

Deadlines

Important deadlines for the 2018 calendar year:

• March 31, 2019 – date the declaration must be filed by homeowners in the regions where the tax applies.
• July 2, 2019 – due date of speculation and vacancy tax payment.

We can help

The tax is extremely complex so please speak with your Baker Tilly WM advisor or any of the individuals listed below, if you have any questions or need further clarification.