Speculation and Vacancy Tax

The Speculation and Vacancy Tax was created by the Provincial Government and is part of the government’s 30-Point Plan on Housing Affordability to make housing more affordable for the people in BC.

The following are some of the reasons the Speculation and Vacancy Tax was created:

  1. To tackle housing crises in major urban centres in British Columbia.
  2. To ensure that people who earn the majority of their income outside BC contribute their fair share in taxes.
  3. To discourage foreign buyers from using homes in BC as a way to earn a profit.
  4. To encourage owners to rent or sell empty homes so more homes will be available for people who need them.
  5. To provide housing to people who live and work in BC

If you own a property that falls in the taxable region, all owners registered on title will be expected to complete a declaration. Before making a declaration on your own, or on behalf of someone, it is important to seek independent advice outside of this article and/or email (spectaxinfo@gov.bc.ca) or call the BC government’s direct line about the Speculation and Vacancy Tax (Toll Free: +1 (833)-554-2323/Outside North America Office: +1 (604)-660-2421). Their office hours as of the date of this article is seven days a week from 8:00 A.M. to 8:00 P.M. Pacific Standard Time. As well as visit the BC government’s site for up to date information.

What is housing speculation?

Speculation, as defined by Investopedia, is the act of conducting a financial transaction that has substantial risk of losing value, but with the expectation of a significant gain. With speculation, the risk of loss is more than offset by the possibility of a huge gain. The lines between investment and speculation can at times be blurred, but some determining factors can include the nature of the asset, the expected duration of the holding period and the amount of leverage.

For example in real estate, purchasing a home with the intention of not living in it, or renting the property long term, would be considered an investment. Purchasing multiple properties with minimal down payments, and the intention of reselling hastily at a quick profit, would be an example of speculation.

The hope with the new tax is to turn empty underutilized homes into available housing for people who live and work in BC, and raise revenue that will support affordable housing. The introduction of the Speculation Tax will try to target foreign and domestic investors who own residences in British Columbia but do not pay taxes here.

What is the cost of the Speculation and Vacancy Tax?

The Speculation and Vacancy Tax rate will vary depending on the owner’s tax residency. In addition, the Tax rate varies based on whether the owner is a Canadian citizen or permanent resident of Canada, or a satellite family. How the Speculation and Vacancy Tax applies is based on ownership as of December 31 of each calendar year. Tax levied on December 31 is due the following July. For example, for a property owned as of December 31, 2018, the 2018 tax rate of 0.5% applies and the tax is due on July 2, 2019.

For 2018, the Tax rate is:

  • 0.5% of the property’s assessed value for all properties subject to the Tax

For 2019 and subsequent years, as of the date, the Tax rate is:

What cities of British Columbia are being taxed?

If you own a residential property in the following municipalities your home may fall under a taxable region, and may be eligible for the Speculation and Vacancy Tax.

How to declare your exemption for the Speculation Tax.

If you own residential property in one of the taxable cities on December 31, the Province will mail a Speculation and Vacancy Tax declaration letter around mid-February. If you are expecting a declaration letter, but haven’t received one by late February, please contact the British Columbia’s Speculation and Vacancy Tax line +1 (833)-554-2323 or e-mail spectaxinfo@gov.bc.ca.

Your declaration letter should list all the residential properties you own in the taxable regions, and will explain how to declare and claim any relevant exemptions. The letter will be sent to your mailing address on file with BC Assessment.

To update your mailing address, please contact BC Assessment.

The letter will include two unique identification numbers: a declaration code and a letter ID. These numbers will match you to your property and are needed to complete the declaration. Your Social Insurance Number will also be used to verify your identity.

If you are a corporation, you will need your incorporation number (ex. BC888888888). If you are declaring online, and your incorporation number has less than 9 digits, add zeros after “BC” until there are 9 digits (ex. BC008888888).

When you receive your declaration letter, you can complete your declaration through the online declaration application. You will be guided through the exemption options for each property. You can also declare over the phone with the help of an agent by calling after receiving your declaration letter. Different language translations are available over the phone.

A friend, family member or someone else can complete the declaration online for you if they:

  • Have the unique identification numbers from your letter
  • Have your Social Insurance Number
  • Complete an Authorization As A Representative form which can be found here.

If you have someone else complete your declaration over the phone, you also have to be present on the call.

What are the exemptions of the Speculation Tax?

There are exemptions available. BC’s government site states “that over 99% of British Columbians are estimated to be exempt…” For a full detailed and verified list of exemptions please visit: gov.bc.ca/spectax.

Some of the exemptions include:

  1. An owner can be exempt if the home is their principal residence, where the owner lives for a period longer than a calendar year. Owners with multiple homes will only be able to claim one property as their principal residence.

    Spouses will not be able to claim two different principal residences unless there is an exception. To be eligible for the exception your spouse would have to prove that you are living apart for medical reasons, work or are separated or divorced.

  2. If there is shared ownership, when more than one owner is on title in the taxable region, each owner can claim their relevant exemption as an individual. Different requirements could apply to different owners. Here are two examples provided by the provincial government.

    The first example provided mentions two parents who co-own a home in Victoria with their adult child. The parents live in Alberta. Their child would claim the principal residence exemption and the parents would claim the tenancy exemption for family or other non-arm’s-length persons.

    The next example provided mentions elderly parents that add their adult child on title to the parent’s condo in Vancouver. The parents live in the unit and their child lives in Northern BC. The parents claims the principal residence exemption and the child claims the tenancy exemption for family or other non-arm’s-length persons.

    For further reading please visit here.

  3. Property owners who have their home rented or lived in by a family member or an other non-arm’s-length person for at least six months in increments of one month or more at a time may be exempt (three months for 2018). It is important to double-check that the tenancy requirements were met. These requirements can be found here.

  4. For a property that is currently under construction or being renovated, the owner may be exempt from the tax, if reasonable steps are taken without undue delay to develop or renovate the property. For further information please visit here.

  5. If the property was just inherited or bought that year, the homeowners could be exempt.

  6. If the property owner has entered into residential care due to age, disability, illness or addiction the homeowner may be exempt for the tax for up to two years if the home was their prior principal residence.  The residential care must have services such as housekeeping, meals or nursing care.

  7. The homeowner may be exempt for medical reasons and need to be away from their principal residence to receive medical treatment for themselves, their spouse or a minor child. The treatment must be proven to be impractical to be treated closer to the owner’s previous principal residence. As of the date that this article was published, a Physician Certification Form must be filled out by a certified medical practitioner. This form can be found here.

  8. A bankrupt owner can be exempt from the tax if the owner’s property has vested with a trustee in bankruptcy for at least 60 consecutive days in the calendar year. A trustee in bankruptcy is exempt from the tax for property vested with the trustee as of December 31.

  9. If the owner of the property passes away in a calendar year, all other owners of the property at the time of death may be exempt in the year of death, and the immediate following calendar year.

  10. If the home is in a trust created by a Will for a minor, the Speculation and Vacancy Tax does not apply to a testamentary trust established by a deceased parent or guardian for the benefit of their minor child.

  11. A property that includes a licensed and operating daycare for children is exempt from the Speculation and Vacancy Tax.

  12. If the property was assessed at a value below $150,000.00, it will be exempt.

  13. A charity that is a registered owner of a property will be exempt from the Speculation Tax.

  14. If a property owner is an Indigenous Nation trustee or a government or related entity, they may be exempt.

  15. Reserve lands, treaty lands and lands of self-governing Indigenous Nations are exempt from the taxes.

  16. Corporations, partners and trustees that own properties in the taxable regions may also be exempt from the Speculation and Vacancy Tax. More information can be found here.

Why the Speculation and Vacancy Tax may be confusing for seniors.

As you can see, there’s a lot to read and understand in regard to the new speculation tax. This may be challenging for seniors, or those for whom English is not their first language. This article only covers some of the key points about the Speculation Tax, as more can be found online from the provincial government’s official site here. It is important to remember if you have parents or know of any other seniors, who are homeowners and English is not their first language, to help them complete their declaration because not everyone is legally- or tech-savvy. If you lend a helping hand, you may be saving them from being taxed on their home.  If you are a homeowner, ensure your Declarations are completed before March 31 2019, or click the source below to check for succeeding dates.

Source: https://www2.gov.bc.ca/gov/content/taxes/property-taxes/speculation-and-vacancy-tax