New BC Real Estate Speculation Tax
In its recent budget announcement, the BC government declared that new legislation will be introduced for an annual real estate speculation tax. This new tax will be effective for the 2018 tax year.
The speculation tax is aimed at foreign and domestic real estate speculators in BC, and will not affect the majority of BC homeowners. Speculators own property that is not occupied by the owner or a recognized long-term rental, placing it outside of BC's long-term housing stock.
The tax will also affect satellite families: Households that have high worldwide income but pay little income tax in BC.
In the first year the tax rate will be $5 per $1000 of assessed value. In 2019, the rate will be increased to $20 per $1000 of assessed value. The speculation tax will first be applied to Metro Vancouver, Fraser Valley, the Capital Regional District, the Nanaimo Regional District, Kelowna, and West Kelowna.
Exemptions from the speculation tax will be available for BC homeowners who:
Use the property as their principal residence (excluding satellite families)
Employ it as a qualifying long-term rental property
Have certain special cases, such as hospital residence or temporary absence for work
Income Tax Credit
The tax will be offset for BC residents by a non-refundable income tax credit. The bulk of the tax will therefore be levied on satellite families, as well as vacant and short-term rental properties owned by individuals who don't live in BC.
Frequently Asked Questions
What Is The Definition Of A Qualifying Long-Term Rental Property?
A qualifying long-term rental is a property that is rented out for at least 6 months of the calendar year, in increments of at least 30 days. For the purposes of 2018, a long-term rental is a property that is rented out for 3 months of that year.
What Is The Definition Of A Satellite Family?
The BC government will be collecting information from homeowners to identify families with high worldwide income, known as "satellite families". These satellite families will not be eligible for principal residence exemption from the speculation tax. Satellite families will, however, be eligible to claim the income tax credit, to the extent that they pay tax in BC.
I Live Outside BC And Own A Residential Property In The Areas Affected. Will I Have To Pay?
If your property does not qualify as a long-term rental, you will be required to pay the tax. If you are a Canadian citizen or a permanent Canadian resident who lives in a province outside of BC, your tax rates will be lower than that of foreign investors.
I Live In BC And Own Two Homes. Will I Have To Pay?
Owners who live in BC and are not categorized as satellite families will have the tax offset by the non-refundable income tax credit by up to $2000. This ensures that you will not have to pay tax on a second home valued up to $400,000.
How Will The Tax Be Administered? How Can I Apply For Exemption Or The Income Tax Credit?
The Province of BC will administer the speculation tax outside of the normal property tax system and property tax cycle. Residential property owners will receive a notice by mail directing them to a BC Government website with an electronic tax form (paper and phone options will also be available). The notices will also contain information on the various exemptions.
The BC Government has made it a primary goal to minimize the burden on BC homeowners who will be claiming an up-front exemption, and to reduce the number of notices that need to be sent in subsequent years.
I Have More Questions Or Need Further Details. Where Can I Get More Information?
Details on the speculation tax, as well as how to apply for an exemption or the income tax credit, can be found in the coming months at gov.bc.ca/propertytaxes and via mail notices.