The British Columbia government has released further details about the Speculation Tax on residential property announced in the 2018 Provincial Budget (the highlights of which are discussed in our previous blog post). These details clarify the geographic areas the Speculation Tax will apply to, along with rates, exemptions, and credits that may be available to offset the Speculation Tax.
The Speculation Tax will focus on urban centres with low vacancy rates and in which home prices drastically exceed local incomes. Accordingly, the list of regions subject to the Speculation Tax has been refined. It will apply to the Metro Vancouver Regional District, the Capital Regional District, Kelowna-West, Kelowna, Nanaimo-Lantzville, Abbotsford, Chilliwack and Mission. The Speculation Tax will not apply to Bowen Island, the Gulf Islands, Juan de Fuca, Protection Island and Electoral Area A (except the part of Electoral Area A comprised of UBC and University Endowment Lands).
The 2018 rate for the Speculation Tax will be 0.5% of the 2018 assessed value of the property. In 2019 and thereafter, the rate will increase to 1% for property owned by Canadian citizens and permanent residents but who are not British Columbia residents, and 2% for property owned by foreign investors and "satellite families" (i.e. households with high worldwide income that pay little or no income tax in BC). The applicable rate for property owned by Canadian citizens and permanent residents who are British Columbia residents, excluding satellite families, will remain 0.5%.
Exemptions and Tax Credits
The primary residences of British Columbians, excluding satellite families, will be exempt from the Speculation Tax. Rental properties will also be exempt, provided that they are rented out in minimum increments of 30 days for a total of at least three months in 2018, and six months in 2019 and beyond. Special circumstances exemptions will also apply, including where the owner or tenant is undergoing medical care, residing in a hospital, long-term care or a supportive-care facility, or temporarily absent for work purposes. Properties owned by deceased persons will also be exempt while estate administration is in progress. Residential strata lots for which existing applicable bylaws prohibit rentals are expected to be temporarily exempt (though stratas will not be permitted to introduce new rental restrictions to avoid the Speculation Tax).
British Columbians who are Canadian citizens or permanent residents will be eligible for a $2,000 tax credit applied against any Speculation Tax payable, but only with respect to a single property. In effect, the Speculation Tax will only be payable on the value of that property exceeding $400,000.
The BC government expects to introduce legislation in the fall of 2018 to implement the Speculation Tax. We will provide a further update when this legislation is made public.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.