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SPECULATION AND VACANCY TAX IN BC AND EMPTY HOMES TAX IN VANCOUVER

Published by nancyjincga.com on 

Please do not confuse BC’s Speculation and vacancy tax with Vancouver’s empty home tax, to avoid potential trouble caused by the failure of declarations.

Speculation and vacancy tax in BC is an annual tax based on how owners use residential properties in major urban areas in B.C.

This tax is an annual tax that applies based on:

  • How property owners use their residential property
  • The property owner’s residency status
  • Where property owners earn and report their income

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

The speculation and vacancy tax is based on government valuation, 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 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.

A speculation and vacancy tax year is the same as a calendar year. Tax levied on December 31 is due the following July while declaration is due on March 31 of each year.

The government will issue a declaration letter mid-January to mid-February each year to every residence, declaration ID and code will be included in the letter.

EXEMPTIONS:

A) Individuals

  1. Principal residence exemptions (to be eligible for a principal residence-related exemption, an owner must be a Canadian citizen or permanent resident of Canada who’s a B.C. resident for income tax purposes and isn’t part of a satellite family), spouses cannot claim two different principal residence exemptions unless specific situations apply, such as spouses living apart for work or medical reasons or because of recent separations or divorce.
    • If you leave your own house for the following reasons, you can claim for principal residence exemptions:
      1. Person with a disability lives in the residence
      2. Living apart from spouse for work reasons
      3. Living apart from spouse for medical reasons
      4. Lived in the residence before moving out of province
      5. Member of the Canadian Armed Forces
  2. The principal residence exemption also applies in cases where the owner lived in the principal residence but no longer lives there under these circumstances:
    1. Lived in home before going into residential care, the owner must have been a B.C. resident for income tax purposes. The owner is exempt from the tax for up to two years if they lived in the home before entering a residential care facility due to age, disability, addiction, illness or frailty. The residential care facility must offer services such as daily meals, housekeeping or nursing care.
    2. Away from home for medical reasons, the owner must have been a B.C. resident for income tax purposes. The owner is exempt from the tax if they’re away from their home to receive medical treatment for themselves, their spouse or their minor child. The medical treatment must be required, as certified by a medical practitioner. The owner must certify that the treatment is impractical to obtain closer to the principal residence. This exemption is available for up to two years for the same medical condition.
    3. Away from home for other reasons (valid once in 10 years). The owner must have been a B.C. resident for income tax purposes. A B.C. resident can claim a principal residence exemption if they’re away from their principal residence for an extended time or no longer living in it, unless they are incarcerated, for reasons such as nursing, historical relic protection work, construction and renovation, housing uninhabitable or medical reasons, etc.
  3. Occupied by a tenant
    • If a renter or non-arm’s length tenant occupies an owner’s home for at least six months in the calendar year, the owner may be exempt from the tax. For the owner to be eligible for the exemption, tenancy requirements must be met.
      1. Arm’s-length (no special relationship between owner and tenant) Tenant, majority of the owners can be exempt;
      2. Non-arm’s-length (family members, relatives or close friends, etc. have special relationships) Tenants:
        • A) Canadian homeowners: majority can be exempt, as long as the tenant is approved by the homeowner and lives most of the month;
        • B) Exemptions are very limited for overseas investors or satellite family members. At least one tenant per residence must:
          • a) Be a Canadian citizen or permanent resident
          • b) Be a resident of B.C. for income tax purposes at the end of the last day of the calendar year
          • c) Not be a member of a satellite family
          • d) Have a B.C. income for the calendar year that is equal to or greater than three times the annual fair market rent for the entire residential property. A tenant may not combine their income with another person for this purpose
  4. Can’t live in the residence because it’s uninhabitable, to be eligible, there must have been at least 60 consecutive days in the year when no one could live there.
  5. Secondary residence close to medical treatment facility. For this exemption only, it doesn’t matter if the owner’s child is an adult or a minor. However, this exemption requires written certification from a medical practitioner.
  6. Just bought or inherited the property, owners are exempt in the year they bought or legally inherited the property.
  7. Separation or divorce. Spouses are eligible for an exemption on family property if they have separated (due to a breakdown in a spousal relationship) and live apart for at least 90 consecutive days in a calendar year.
  8. An owner who is on title as a trustee in bankruptcy as of December 31 is exempt from the tax.
  9. Recent death of owner. If an owner of a property dies, all owners of the property at the time of death are exempt in the year of death and the immediately following calendar year.
  10. Property is in a trust created for a minor by a will.
  11. Property has rental restrictions (2018, 2019, 2020 and 2021 tax years only). This only applies if the rental restriction was in place on or before October 16, 2018, and the owner also purchased the property before that date.
  12. Property is a strata hotel. Owners of a strata accommodation property as defined in the Assessment Act, also called strata hotels, are exempt. This exemption was introduced as a temporary exemption but was made permanent in 2022; it is now available for the 2018 and subsequent tax years.
  13. Property includes a licensed child daycare
  14. No residence on the property (2018 and 2019 tax years only)
  15. Other exclusions from the tax, for example, the owner of the house is a charitable organization, non-profit, government, municipality, etc., or the estimated value is less than 150,000.

B) Land under development

Development and construction, major renovations, new inventory (unsold units), and preserved historical and cultural properties are exempt, but certain regulations must be followed to be exempt. For example, for land under development, a series of activities must be actively carried out, such as Applying for loans, applying for permits, signing design, construction and engineering contracts, etc., demolition and clean-up of the site and other necessary activities, etc.

C) Corporations, trustees and business partners exemptions for the speculation and vacancy tax

Residential properties owned by companies, trusts or partnerships are also exempt from speculation tax. Companies, trustees (custodians) or partnerships must consider the company’s interest holders, beneficiaries and partners as individuals owning the property, see Whether the exemption conditions are met, that is, these people must be Canadian citizens or permanent residents, and BC tax residents, and not a member of satellite family.

In the case of speculation tax and vacancy tax, depending on the homeowner’s tax residency status and income tax filing status, you can also apply for Tax Credit tax relief.

EMPTY HOMES TAX IN CITY OF VANCOUVER

The Empty Homes Tax is a tax for every home owner who owns a residential property in the City of Vancouver, one must declare their property status annually. If the house is determined to be vacant in a certain year, the tax rate is 1%, and the tax amount is the government’s appraisal of the house in that year, multiplied by the tax rate of 1%, and paid to the City of Vancouver. Starting in tax year 2023, Vancouver’s empty home tax rate will increase to 5%.

Declaration period: January 1st to December 31st of each year;

Most properties will not be subject to the Empty Homes Tax, including those:

  1. Used as a principal residence by the owner, their family member or friend, or other permitted occupier for at least six months of the vacancy reference year
  2. Rented for residential purposes for at least six months of the vacancy reference year, in periods of 30 or more consecutive days
  3. Others

City of Vancouver will send a letter to each homeowner from November to the beginning of the following year, which will include property tax notice and a guide to vacant home tax returns.

For those homeowners in Vancouver and BC, please remember to declare the relevant taxes. If you have any questions or need more detailed information, please contact us at 604-232-1070.