The housing crisis has been a major issue, and the BC government has to deal with it head-on. To do so, it introduced the BC vacancy tax in the densely populated areas of British Columbia. It is an ideal approach to ensuring that homes are not left empty as other Canadian citizens and residents struggle to get affordable housing in regions with dense populations.

Let us look further into BC’s speculation and vacancy tax.

What Is the BC Vacancy Tax?

The speculation and vacancy tax is also known as the empty homes tax and was first introduced in 2017. It is tax paid annually by homeowners whose homes are often vacant, like six months of the year.

It ensures satellite families and foreign owners contribute fairly to BC’s tax system. In addition to that, the tax discourages people from leaving houses empty and speculating on housing markets.

 The empty homes tax addresses the housing crisis in population-dense areas. The tax does not apply to the entire province of British Columbia. The BC government states that over 99% of British Columbians are exempted from it. This speculation tax only applies to specific regions affected by the housing crisis. These regions are:

• The Capital Regional District (Victoria, Saanich, etc.)
• The Metro Vancouver Regional District (Vancouver, Surrey, etc.)
• 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

Despite aiming at the regions with the highest populations, there are several exemptions. To avoid the speculation tax, all you need to do is to check your mail for the declaration form. This would inform the government that you’re living in your home.

You have until December 31 of each year before the tax applies, but even if you miss the deadline, you can still contact the government to prove that you were living in the home that year.

The BC government has already announced that the areas where the speculation and vacancy tax applies will be expanded. However, the owners in these areas will not have to declare till 2024. The new areas include;

• Lions Bay
• North Cowichan
• Ladysmith
• Lake Cowichan
• Squamish
• Duncan

Homeowners pay tax based on different factors, including;

• The owner’s residency status
• What property owners use their property for
• Where do they make and report their income

Speculation and Vacancy Tax Rates

This annual tax is charged on every owner’s share of the assessed value of the property. If it is owned by two individuals, then each owner will pay 50% of the asset’s value tax total.

The tax rates vary depending on the owner’s tax residency. It also varies based on whether or not the owner is a Canadian citizen or a permanent resident.

Here are the speculation and vacancy tax rates by year:

For 2018, the tax rate is:

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

For 2019 to 2025, the tax rate is:

• 2% for foreign owners and untaxed worldwide earners
• 0.5% for Canadian citizens or permanent residents of Canada who are not untaxed worldwide earners

For 2026 and subsequent years, the tax rate is:

• 3% for foreign owners and untaxed worldwide earners
• 1% for Canadian citizens or permanent residents of Canada who are not untaxed worldwide earners

Business partners, trustees, and corporations have the highest tax rate applicable to any business partners, corporate interest holders and beneficial owners.

Who Is Exempted from the Speculation and Vacancy Tax?

Exemptions are based on how everyone uses their residential property. Below are some of the most common exemptions.

a) Shared Ownership

If you buy a home for yourself with your parent also on the title, but your parent lives elsewhere, then you can claim an exemption for yourself as the principal resident. Your parents can claim a tenancy exemption since they’re letting a family member live in the home that they partially own. In short, if the property has multiple owners, each owner must complete a declaration, even when the other owner is a spouse.

b) Occupied by a Tenant

The owner of the property can avoid vacancy tax if the property is occupied by a tenant for at least 6 months of the calendar year. It doesn’t have to be 6 months with one tenant, but each tenant must have rented the property for at least one month (otherwise, most Airbnb would be exempted).

This exemption also applies to property with more than one building on it. If you have a vacation home with a guest house, the entire property would be exempted, given that you rent out one of the buildings for at least 6 months of the year.

c) Just Acquired the Property

If you just bought or received property and paid the property transfer tax (or were exempted from the tax), then you will also be exempted from the vacancy tax for that calendar year. The following year, however, you will have to claim a different exemption to the vacancy tax.

d) Other Exemptions

For a full list of other exemptions, including newly built homes, charities, and veterans, check out this website from the BC government.

What if I’m Not Eligible for an Exemption?

The tax rate depends on if you’re a foreign owner or a Canadian citizen. Foreign owners and satellite families pay 2% of the property’s assessed value, while Canadian citizens who aren’t part of satellite families pay 0.5%.

A satellite family is a household that declares less than 50% of its total combined income on Canadian income tax returns. It’s possible for Canadian citizens to be in a satellite family, which means they would have to pay a higher vacancy tax rate.

Not Sure If You Qualify for an Exemption?

Give BC Property Transfer Tax Office a call at (250) 387-0555.

Want to discuss your real estate transaction?

Give us a call at 604-559-2529 or email us at [email protected].

The Tax Credits

You may qualify for a tax credit even if you are not eligible for an exemption. Your tax credits calculations depend on whether you are a BC property owner, satellite family, foreign owner, or non-resident owner. We shall break them down for a better understanding;

a) BC Owners

BC residents might receive a non-refundable tax credit to minimize the amount of tax payable if they were not eligible for the speculation and vacancy tax exemptions.

Eligibility for a tax credit is only achieved if you submitted a declaration, and as of December 31, you were among the residents of BC for income tax purposes. You should also be a Canadian citizen, a permanent resident or a BC provincial nominee and not considered a satellite family member.

If you are eligible, the credit will automatically be applied to your account. You may receive a maximum credit of $2,000 applied to one or all properties per year if you qualify. Remember that the credit is calculated using your ownership percentage.

This is a non-refundable tax credit, so your tax liability automatically becomes $0 if the tax credit is greater than the tax you owe. The tax is also not transferable to a spouse, nor can it be carried forward to future years.

b) Satellite Families and Foreign Owners

Satellite families are also known as untaxed worldwide earners. They are individuals whose unreported income is more than the reported income. For this calculation to be done, spouses’ incomes are combined. The reported and unreported income that is used in this calculation is from the year before the vacancy tax year.

c) Other Canadian

Non-BC Canadians are eligible for a tax credit based on the income they claim in BC. Just like foreign owners’ restrictions, the tax rate cannot be reduced to less than that of an equivalent BC resident. For unused tax credits, they can be carried forward for a maximum of two years or even transferred to a spouse.

Penalties

Late payment comes with consequences. In this case, if you do not declare your property on time, you will be penalized 10% of the unpaid tax and interest on the pending taxes and the penalty amount. This is because failing to make the declaration leads to the assumption that your house is vacant.

If the residential property owners fail to submit their declaration, they are sent a tax notice that charges them the vacancy tax at the maximum rates.

Frequently Asked Questions on BC Vacancy Tax

1. When does the government mail declaration letters to homeowners?

If you are a homeowner, expect to receive your declaration letter anytime between the end of January to mid-February. The exact date you receive yours depends on the destination area. Suppose you have residential properties in any of the designated areas and fail to receive a letter by late Feb. In that case, you’ll have to contact the government because information on that letter is needed to make the declaration.

2. When is the due date for BC vacancy tax declarations?

All declarations for homeowners are due on the 31st of March. Homeowners receive a notice of assessment showing the amount they owe, which they should pay by the first business day of July. However, you can pay as early as possible, provided you receive the notice of assessment.

3. Must I declare and claim my exemption even if my home is occupied?

Yes, if you are in a taxable region, you must claim your exemption and complete the declaration online.

4. Is the speculation and vacancy tax the same as the empty home tax?

No, the two are not the same. The City of Vancouver’s empty homes tax is a municipal tax paid by those within Vancouver. In contrast, the speculation and vacancy tax is a form of provincial tax that property owners in BC, within taxable regions, pay.

If you own property in the city of Vancouver, you will have to file an empty homes tax declaration and a speculation and vacancy tax declaration.

5. Can you appeal the speculation and vacancy tax?

If you think an error has been made in your assessment, you may file a formal appeal. However, you cannot opt-out even if you forgot to file or disagree with the need to declare.

However, it is only wise to pay your assessment to avoid more complications, even if you plan to appeal. If your appeal is approved, you will be paid back the overages and interest, so you will not incur any losses.

6. Does one have to pay BC speculation and vacancy tax?

If you own property in the taxable regions of the province, you will have to pay the BC vacancy tax. However, this only applies to you if you do not use the property as a principal residence and do not rent it out for a minimum of six months annually.

Keep in mind that you may qualify for other exemptions, like if your property is owned by a registered charity or if it is a housing co-op.

Featured Image by Scott Graham on Unsplash