Speculation Tax: An Explanation From Kelowna Lawyers
In the Fall of 2018, the BC Provincial Government will implement a speculation tax on vacant, residential properties in certain regions of the province. The government has introduced the tax to make more housing available to BC residents and it anticipates collecting $200 million dollars next year from the tax. The B.C. government believes that most primary residents and long-term rentals will be generally exempt. However, concerns now exist about the impact the tax will have on tourism and business in certain regions.
The speculation tax will target housing markets in different regions of the province, namely: The Vancouver Regional District (Excluding Bowen Island and Electoral Area A, except the part of the electoral area that is the UBC and University Endowment Lands), the Capital Regional District (excluding the Gulf Islands and Juan de Fuca), Kelowna, West Kelowna, Nanaimo-Lantzville (excluding Protection Island), Abbotsford, Chilliwack and Mission.
The government feels over 99% of residents will be exempt from the new tax because the majority of homes in the province are occupied by the owners or are long-term rentals.
Homeowners who don’t live in BC and satellite families will be subject to the tax unless they are renting out their property. If a property owner resides in the property as its principal residence and wishes to avoid the tax, they must rent their property for a minimum of six months each year, in increments of 30 days or more. There are also exemptions for special circumstances such as a vacant home as a result of medical reasons.
There is also a tax credit available for British Columbians who own a second home that is valued at $400,000 or less. The credit is $2,000 and will fully offset the cost of the tax on those eligible properties.
The rate will be 0.5% of the taxable assessed value for the 2018 tax year. In 2019 the tax rate will increase to 2% for foreign investors and satellite families, 1% for Canadian citizens and permanent residents who do not live in BC, and 0.5% for British Columbians who are Canadian citizens and permanent residents (and not members of a satellite family).
There has been significant pushback on this tax from different groups within British Columbia. Both West Kelowna and Kelowna have sought an exemption from the tax and throughout the province, there is support for Scrap the Speculation Tax. Additionally, a group called Canadians Against the B.C. Speculation Tax is raising funds to lobby the provincial government and/or possibly commence legal action in regard to the tax. The provincial government announced changes to the tax in March to address some of the initial concerns that were raised and time will tell if they respond to the continued pressure.
Needless to say, this has been a divisive issue across the province and the country with groups passionately supporting or opposing the tax. Doak Shirreff’s real estate team stays in touch with the changes and issues in B.C real estate and our team is here to help with all your real estate transactions.