BC Speculation Tax- The Basics

The BC Speculation and Vacancy tax, introduced in 2018, is a tax intended to promote a more affordable housing market by incentivizing homeowners to fill their vacant properties and by generating revenue for government housing initiatives. In this article, we’ll cover the basics of the tax and how homeowners are effected, including exemptions and filing responsibilities.

What is the Tax?

The Speculation and Vacancy Tax aims to reduce the number of residential properties that sit vacant. In British Columbia and Canada more widely, institutional and foreign investors buying residential properties as investments have gained a reputation for leaving the homes they buy empty. Often, these investors are interested in the high returns from owning homes as their value appreciates quickly and often more consistently than other investments. Some of these investors choose to leave these properties empty, seeing the process of renting these homes out as cumbersome, costly, or posing risk of damage to their investment properties. This has been identified as a major element in the wider issue of scarcity of housing available for rent and purchase by individuals, as well as increased costs for residential renters and buyers. 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, which is more broad.

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 about this requirement if you are subject to the tax to ensure people are aware of their responsibility. Homeowners in taxable areas must fill out the declaration form each year, even if they are exempt from the tax.

Exemptions to the Speculation and Vacancy Tax

Almost all BC residents are exempt from this tax, as it is aimed to deter a very specific type of property investment which reduces available housing stock. 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 property is a primary residence which has been temporarily vacated for reasons including illness, divorce or another extended absence such as travel
• The property has been purchased 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. If the property belongs to an individual or family with ‘satellite’ tax status, the applicable tax rate will be 2% of the home’s assessed value 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.