What is the new speculation tax and how does it affect you?
Urban centres throughout the province are in a housing crisis. Rents and home prices have surged past local incomes and, in many communities, vacancy rates sit close to 0%. The speculation tax was created to push speculators out of the market in order to curb runaway home prices and rents and increase the supply of available housing. The speculation tax applies to properties in the Metro Vancouver Regional District (excluding Bowen Island and parts of Electoral Area A), the Capital Regional District (excluding the Gulf Islands and Juan de Fuca), Kelowna-West Kelowna, Nanaimo-Lantzville (excluding Protection Island), Abbotsford, Chilliwack, and Mission (the “Designated Area”).
In 2018, the speculation tax rate for all affected properties is 0.5% on the tax-assessed value of the property. In 2019 and subsequent years, the tax rates will be as follows:
• 2% for foreign investors and satellite families;
• 1% for Canadian citizens and permanent residents who do not live in British Columbia; and
• 0.5% for British Columbians who are Canadian citizens or permanent residents
Who pays the tax?
· BC residents who own multiple properties in the Designated Areas that do not rent out or live in the property
· Foreign owners who do not rent their properties
· Satellite families who live in B.C., have high worldwide income but pay little income tax in B.C.
Who doesn’t pay the tax?
· BC residents who own and live in their home
· BC residents whose homes and cottages are outside the designated area
· BC residents who hold properties in designated urban centres that are rented out for at least six months of the year (in 2018 they only need to be rented for 3 month to qualify)
Tax credit and Exemptions:
British Columbians with vacant property in the Designated Areas will be eligible for a non-refundable tax credit that offsets a total of $2,000 in speculation tax payable and is immediately applied against the speculation tax owing. For homeowners with multiple properties, the tax credit will only apply to one property. This tax credit will ensure that British Columbians do not pay tax on a second home valued up to $400,000. For more expensive vacant properties, the credit ensures that tax only applies to the value of the property above $400,000.
There will also be other exemptions to accommodate special circumstances including:
• The owner or tenant is undergoing medical care or residing in a hospital, long-term care or a supportive-care facility
• The owner or tenant is temporarily absent for work purposes
• The registered owner is deceased and the estate is in the process of being administered