And everything you need to know about it!
Written By: Graeme MacPhail, REALTOR of Royal LePage Nanaimo Realty. I’d love for the opportunity to earn your business in both buying or selling a property. Give me a call.
Recently, British Columbia has introduced a Speculation Tax that potentially may be affecting your vacant home, or even if your home is often vacant. This blog will go over how that tax is calculated, and what the exemptions are for it.
What is this new Speculation Tax?
The new speculation tax is an annual tax that owners of either a vacant home, or home that is vacant for more than 6 months a year will have to pay. The intention of this tax, as stated by the government, is to ensure that satellite families, or foreign owners are contributing their ‘fair share’ to the provincial tax systems. The BC Government has however stated that over 99% of British Columbians will be eligible for the exemption of the Speculation Tax. This is because if you are living in your principle residence, or are an owner of a property that is occupied by tenants, you will be able to apply for your exemption.
How is the speculation Tax Calculated?
The tax rate is calculated as such: 2% for foreign owners and satellite families, and 0.5% for Canadian Citizens or permanent residents of Canada who are not members of a satellite family. The speculation tax applies based on ownership as of December 31st each year.
Are there any tax credits if I have to pay?
Your calculation of tax credit depends on whether you are a B.C owner, foreign owner/satellite family, or non-resident.
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 who has a home assessed at up to $400,000 and would otherwise pay the tax will be exempt. This is because the value of the tax credit is equal to or more than the amount they would owe. ($400,000 x 2% = $2000)
For B.C. homeowners, this means that if your home is assessed at or above $400,000 that you will only pay the tax for the portion of the assessed value greater than $400,000. For example, if you have a property worth $800,000 then you will only pay the tax on $400,000. ($800,000-$400,000 = $400,000)
There is a credit maximum of $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. 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.
Other Canadians – Non-B.C. resident Canadians will be eligible for a tax credit based on their income claimed in B.C.
Similar to foreign owners and satellite families restrictions, 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; Tax credits are pro-rated in 2018 when the tax rate is 0.5% for all owners.
Do I have to claim my exemption?
Yes, unless you want to needlessly pay it, you have to claim your exemption by completing a declaration online or by phone. The easiest way to declare is online at gov.bc.ca/spectax, in which you will need your declaration code & letter ID (you will receive a mailout sent by the government), your property address, and your social insurance number to confirm your identity.
Homeowners in taxable regions need to declare before March 31, 2019.
What are the taxable regions for the Speculation and Vacancy Tax?
The taxable regions include:
- Municipalities within the Capital Regional District, except Salt Spring Island, Juan de Fuca Electoral Area, and the Southern Gulf Islands.
- Metro Vancouver municipalities, except Bowen Island and the Village of Lions Bay.
- West Kelowna
- District of Lantzville
If a property has joint owners, is each owner required to make a property status declaration?
For the Speculation and Vacancy Tax, if a property has more than one owner EACH OWNER MUST COMPLETE A DECLARATION. This is true even if the other owner is a spouse.
What if I am the co-owner of a taxable residential property?
If you own a property with a co-owner and you fall under the exemption but your partner does not, then you will still be exempt.
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, the other owner will still have to pay tax based on their percentage ownership of the residential property as listed with the Land Title Office.
According to the provincial government, more than 99 per cent of British Columbians will be exempt.
Is your residential property your primary home? If so, you’re exempt.
Do you plan to rent out the property for six months or more for 2019 and moving forward? If yes, then you’re exempt!
The government says the tax is designed to “target foreign and domestic speculators who own residences in B.C. but don’t pay taxes here.” It’s likely that if you don’t fall within that category then you will be exempt from the Speculation and Vacancy tax.
If I do have to pay the BC Speculation and Vacancy tax, when is the payment due?
If applicable, the payment is due by no later than 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.
(Don’t forget: The declaration deadline is March 31, 2019.)