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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.
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:
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.
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.
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:
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.
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.