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B.C.’s Speculation and Vacancy Tax

DBM Law Blog

A new year, a new tax! If you own a residential property in BC, this will affect you. It is called the Speculation & Vacancy Tax.

What is the Speculation & Vacancy Tax?

The speculation and vacancy tax is an annual tax potentially paid by owners of residential properties in designated taxable regions of B.C. The tax is designed to discourage housing speculation and people from leaving homes vacant in B.C.’s major urban centres. All residential property owners in the taxable regions must complete a declaration, even if they’re eligible for an exemption.

EMPHASIS: The speculation and vacancy tax is distinct from the empty homes tax in the City of Vancouver. If you own a home a property in the City of Vancouver, you will need to file a Speculation Tax Declaration AND an Empty Homes Tax Declaration.

What is the cost of the Speculation & Vacancy Tax?

 The speculation and vacancy tax rate varies 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.

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, the tax rate is:

  • 2% for foreign owners and satellite families
  • 0.5% for Canadian citizens or permanent residents of Canada who are not members of a satellite family

The speculation and vacancy tax applies based on ownership as of December 31 each year.

B.C. owners are eligible for a tax credit of up to $2,000 on secondary properties to offset their tax payable. The credit is limited to $2,000 per owner and $2,000 per property (in the case of multiple owners) per year.

The speculation and vacancy tax applies based on ownership as of December 31 each year.

If a residential property has multiple owners, tax is divided among each owner based on their ownership share. For example, if you and your spouse are equal owners of a residential property in a taxable region, you’ll each owe tax on 50% of the home’s assessed value.

Exemptions are based on how each person uses each residential property. If you’re the co-owner of a residential property in a taxable region and are exempt, but the other owner isn’t exempt, the other owner will have to pay tax based on their percentage ownership of the residential property as listed with the Land Title Office.

 

A speculation and vacancy tax year is the same as a 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. You will be able use our online payment system or you can also pay through your financial institution, by cheque, or in person at a Service BC centre.

If you are charged the speculation and vacancy tax but don’t pay what you owe, you may be charged a penalty and interest in addition to the amount of tax you owe.

You’ll be able to receive a refund if you paid the speculation and vacancy tax but learn later that you’re exempt. You will need to contact them to request the refund or the credit will be applied to your next year’s speculation and vacancy tax.

The Tax Credit

If you’re not eligible for an exemption, you may qualify for a tax credit.

B.C. owners – B.C. owners are eligible for a tax credit of up to $2,000 on a secondary property. This means an owner of a home assessed at up to $400,000, who would otherwise pay the tax, will be exempt, since the value of the tax credit is equal to or more than the amount they would owe. This also means an owner of a home assessed at above $400,000 will only pay tax on the amount over $400,000 (for example, for a $500,000 property, the owner will only pay tax on $100,000). The credit is limited to $2,000 per owner and $2,000 per property (in the case of multiple owners) per year. The tax credit cannot be carried forward or transferred to a spouse.

Foreign owners and satellite families – Foreign owners and satellite families can claim a tax credit equal to 20% of their B.C. income to reduce the 2% speculation and vacancy tax owing. The tax credit cannot reduce the tax rate below the rate for an equivalent B.C. resident (zero on a principal residence or 0.5% on other properties). Unused B.C. income may be carried forward for up to two years or transferred to a spouse. The tax credits are pro-rated in 2018, when the tax rate is 0.5% for all owners.

Other Canadians – Non-B.C. resident Canadians will be eligible for a tax credit based on that income claimed in B.C. The tax credit cannot reduce the tax rate below the tax rate for an equivalent B.C. resident. Unused tax credits may be carried forward for up to two years or transferred to a spouse. The tax credits are pro-rated in 2018, when the tax rate is 0.5% for all owners.

EMPHASIS: If you are foreign owner, a member of a satellite family, or a non-BC resident Canadian, seek the advice of your accountant or tax lawyer.

 What is a Satellite Family?

When you complete your declaration for the speculation and vacancy tax, the declaration takes into account where in the world the majority of your combined spousal income is reported.

A satellite family is an individual or spousal unit where the majority of their total worldwide income for the year is not reported on a Canadian tax return.

People who declare LESS than 50% of their total combined household income for the year on Canadian income tax returns may pay tax at the highest rate and may not be entitled to all exemptions. People in this situation are considered members of a satellite family. This could apply to you even if you are a Canadian citizen or B.C. resident.

Examples:

  • One spouse is a Canadian citizen but isn’t the home owner, while the other spouse is the owner but isn’t a Canadian citizen or permanent resident. Around 70% of their combined worldwide income is earned outside of Canada and is not reported on a Canadian income tax return. Both spouses are members of a satellite family.
  • One spouse owns the home but is out of the country most of the time, earning 100% of his income from outside Canada with no obligation to report to Canada Revenue Agency. The other spouse and their children live in their B.C. house. Since the combined income of these two spouses is entirely unreported on Canadian tax returns, they are both considered members of a satellite family.

EMPHASIS: If you are wondering if you fall under this category, seek the advice of your accountant or tax lawyer.

What are the Taxable Regions for the Speculation & Vacancy Tax?

Only those owning residential property located in a designated taxable region in B.C. must complete a declaration for the speculation and vacancy tax.

Following are the designated taxable regions:

  • Municipalities within the Capital Regional District. This excludes Salt Spring Island, Juan de Fuca Electoral Area, and the Southern Gulf Islands
  • Municipalities within the Metro Vancouver Regional District, excluding Bowen Island, the Village of Lions Bay and Electoral Area A, but including UBC and the University Endowment Lands
  • The City of Abbotsford
  • The District of Mission
  • The City of Chilliwack
  • The City of Kelowna
  • The City of West Kelowna
  • The City of Nanaimo
  • The District of Lantzville

Reserve lands, treaty lands and lands of self-governing Indigenous Nations are not part of the taxable regions.

Islands that are accessible only by air or water are not part of the taxable regions.

Some residential properties are excluded from the speculation and vacancy tax even though they are located within a taxable region. These include residential properties owned by:

  • An Indigenous Nation
  • Municipalities, regional districts, governments and other public bodies
  • Registered charities
  • Housing co-ops
  • Certain not-for-profit organizations
  • You can also refer to the legislation for a list of exclusions.

If your residential property is excluded for one of these reasons, you only need to complete a declaration if you have received a declaration letter.

EMPHASIS: Most people are not geography experts. Just assume your property is in the Taxable Region. If you don’t get a letter for that property by late February, call their hotline and get confirmation that the property is not in a Taxable Region. The property may actually be in a taxable region, but the property was inadvertently missed in your letter or the letter was lost in the mail. You would still be obligated to file the Declaration.

Declaration for the Speculation & Vacancy Tax

 If you own residential property in a designated taxable region on December 31, the Province will send you a speculation and vacancy tax declaration letter in the mail by mid-February. Contact the agency at their hotline if you’re expecting a declaration letter from them and haven’t received one by late February.

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

If you need to update your mailing address, please contact BC Assessment to do so.

Your letter will include two unique identification numbers: a declaration code and a letter ID. These numbers match you to your property. You’ll need these numbers to complete your declaration. You’ll also need your social insurance number to verify your identity.

If you’re a corporation, you’ll need your incorporation number (e.g. BC123456789). If you’re declaring online and your incorporation number is fewer than 9 digits, add zeros after “BC” until you have 9 digits (e.g. BC001234567).

As soon as 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.

If you prefer, you can declare over the phone with the help of an agent by calling us after you receive your declaration letter. Language translation services are available over the phone. Toll Free: 1 833 554-2323 and (Outside North America) Office: 1 604 660-2421

Complete your declaration right away to claim any relevant exemptions and avoid receiving a tax notice.

Someone else can complete your declaration online for you if they:

  • Have your unique identification numbers from your letter
  • Have your social insurance number
  • Complete an Authorization as a Representative form (FIN 146)

However, if someone else is completing your declaration over the phone, you must also be present on the call. This is because protecting your personal information is important to us.

You must complete the declaration by March 31. If you do not declare it by March 31, you will receive a tax notice and may be taxed.

EMPHASIS: If your property has more than own owner, even if the other owner is your spouse, a separate declaration must be made for each owner.

 

EMPHASIS: If you are unsure if you are exempt of the tax or not, you may want to file the declaration over the phone. I have been advised that it may take a lot longer to file over the phone, but you may want the clarity that another person over the phone can provide.

 

EMPHASIS: If you don’t get a letter for your property by late February, call their hotline. Just because the letter gets lost in the mail does not mean you are off the hook. You would still be obligated to file the Declaration.

Multiple Owners of a Property

If a residential property has multiple owners, tax is divided among each owner based on their ownership share. For example, if you and your spouse are equal owners of a residential property in a taxable region, you’ll each owe tax on 50% of the home’s assessed value.

Exemptions are based on how each person uses each residential property. If you’re the co-owner of a residential property in a taxable region and are exempt, but the other owner isn’t exempt, the other owner will have to pay tax based on their percentage ownership of the residential property as listed with the Land Title Office.

EMPHASIS: If your property has more than own owner, even if the other owner is your spouse, a separate declaration must be made for each owner.

What Are the Dates Again (just for the 2018 Speculation & Vacancy Tax)?

  •  Jan 2019-Feb 2019 – speculation and vacancy tax letters mailed
  • Jan 21, 2019 – declaration period opens
  • Mar 31, 2019 – declaration due
  • Apr 2019 – most tax notices mailed
  • Jul 2, 2019 – tax payment due

 Exemptions

 As the BC Government has stated, most British Columbians will be exempt of the Speculation & Vacancy Tax, but you will still be required to file the Declaration. For a list of Exemptions, click on this link:

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

In future blog posts, I will examine some of these exemptions in further detail. Should you be in a “grey area”, I would recommend that you file the declaration over the phone, where an agent can assist with questions you may have.

 How do I Contact a Speculation & Vacancy Tax Agent?

 

Contact an agent the following ways:

Toll Free: 1 833 554-2323

(Outside North America) Office: 1 604 660-2421

Email: spectaxinfo@gov.bc.ca

Conclusion

 The Speculation & Vacancy Tax can be convoluted, but the biggest lesson I want readers to learn from this blog post is that if you own residential property in a designated taxable region of BC, you will be required to file the Declaration. If your property has more than own owner, even if the other owner is your spouse, a separate declaration must be made for each owner.

So…..FILE YOUR DECLARATION.

 

If you have any questions about this post, please contact Lewis Nguyen at lewis@dbmlaw.ca or 604-937-6373. However, please note that I will not be able to provide any advice on whether you will be exempt of the Speculation & Vacanacy Tax or not. For questions about your status, contact an agent the following ways:

Toll Free: 1 833 554-2323

(Outside North America) Office: 1 604 660-2421

Email: spectaxinfo@gov.bc.ca

 

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