BC Speculation Tax- The Basics

The government introduced the BC Speculation and Vacancy tax in 2018 to incentivize homeowners to occupy their vacant properties. The tax also aims to generate revenue for housing initiatives, ultimately creating a more affordable housing market. This article will guide you through the basics of the tax, its impact on homeowners, and exemptions.

What is the Tax?

The Speculation and Vacancy Tax aims to reduce the number of residential properties that sit vacant. In British Columbia, institutional and foreign investors in real estate have gained a reputation for leaving properties empty. The BC Speculation tax applies to residential properties in the following areas:

• Capital Regional District (CRD)
• Metro Vancouver Regional District
• City of Abbotsford
• District of Mission
• City of Chilliwack
• City of Kelowna
• City of West Kelowna
• City of Nanaimo
• District of Lantzville

The taxable regions are population centres in British Columbia, where the ongoing housing crisis is particularly severe. This differs from the similar Federal Underused Housing Tax, which applies across Canada in census population centres.

Responsibility of Those Subject to the Tax

If you have property in these BC areas, you need to submit a yearly declaration form. The form tells the government about where you live and how you use your property. The BC government sends a letter if you are subject to the tax to ensure people are aware of their responsibility. Further, homeowners in taxable areas must fill out the declaration each year, even if they are exempt from the tax.

Exemptions to the Speculation and Vacancy Tax

This tax, aimed at deterring property investment which reduces available housing stock, exempts almost all BC residents. Some of the most common exemptions to the tax include people who:

• Own one property and it is their primary residence
• Own an additional property (or properties) which are rented out at market rate for at least 6 months of each year
• The owner has temporarily vacated the primary residence due to reasons such as illness, divorce, or other extended absences like travel.
• Purchased the property in the past year.
• The vacant property is owned by a public body or not-for-profit organization, an Indigenous group or First Nation, or some registered charities

Note that short term rental periods of less than 4 weeks cannot count towards the 6 cumulative months rented in the year to exempt the property from the tax.

Details of the Tax

Interestingly, the rate of tax incurred relative to property value differs based on the tax status of the property owning individual. An individual or family with ‘satellite’ tax status will have a tax rate of 2% applied to the assessed value of their property in that year. ‘Satellite’ refers to individuals or families whose main source of income (more than 50%) comes from outside of Canada and who are not subject to Canadian income tax. Read more on special satellite tax status in our article here. For Canadian citizens and permanent residents who don’t belong to this special tax category, the rate is 0.5% of the home’s assessed value in that year.

If you’re a homeowner or prospective home buyer with questions about navigating this tax or other new vacancy taxes, contact an experienced lawyer today. We’ll ensure you fully understand your tax obligations and potential exemptions.

Have a question about this topic or a different legal topic? Contact us for a free consultation. Reach us via phone at 250-888-0002, or via email at info@leaguelaw.com.