The speculation tax was introduced by the government in 2018 with an emphasis to target foreign and out-of-province residents currently paying little or no income tax.
Speculation tax notices are issued to all property owners in B.C. in February each year. Once you receive the notice, you must complete the declaration.
When more than one owner is on title, each owner must claim their relevant exemptions as an individual.
The following exemptions are available for individuals:
- Principal residence exemptions
- Occupied by a tenant for at least six months of the year in increments of one month or more at a time may be exempt (three months for 2018).
- Can’t live in the residence because it’s uninhabitable
- Secondary residence close to medical treatment facility
- Just bought or inherited the property
- Separation or divorce
- Recent death of owner
- Property is in a trust created by a will for a minor
- Property has rental restrictions
- Property is a strata hotel
- Property includes a licenced child daycare
- No residence on the property
- Other exclusions from the tax
NOTE* 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.
The declaration takes into account where in the world the majority of your combined spousal income is reported. People who declare LESS than 50% of their total combined household income for the year on Canadian income tax returns may pay tax at the highest rate and may not be entitled to all exemptions. People in this situation are considered members of a satellite family. This could apply to you even if you are a Canadian citizen or B.C. resident.
NOTE* Rental exemptions looks specifically at whether the property is being occupied by an arm’s length or non-arm’s length tenant.
1. If you are a Canadian owner (not satellite family) and your property is occupied by a non-arm’s length tenant (i.e. family members) most of the time each month with your permission, exemptions may apply.
2. If you are a foreign owner or is a member of a satellite family, and your property is being occupied by non-arms length tenant, an exemption may apply only if the tenant is
- a Canadian citizen or permanent resident
- Be a resident of B.C. for income tax purposes at the end of the last day of the calendar year
- Not be a member of a satellite family
- 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
- Lives in the home for more than six months of the year
3. Whether you are a Canadian or a foreign owner, If the tenant is an arm’s-length tenant (non family members), you may be eligible for a rental exemption, if:
- The tenant has no advantage of any personal or family relationship to an owner
- A written tenancy agreement is in place under the Residential Tenancy Act, and
- The tenant makes the residence their home & lives in the home for more than six months of the year
How to Declare
The easiest way is to declare online with the unique letter ID and declaration code stated on your notice. Alternatively, you can phone in.
Tax Rates if Not Exempt
The speculation and vacancy 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 2018, the tax rate is:
- 0.5% of the property’s assessed value for all properties subject to the tax
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
The speculation and vacancy tax applied are based on ownership as of December 31 each year. A speculation and vacancy tax year is the same as a calendar year. Tax levied on December 31 is due the following July. For example, for a property owned as of December 31, 2018, the 2018 tax rate of 0.5% applies and the tax is due on July 2, 2019.
If you’re not eligible for an exemption, you may qualify for a tax credit.
If you owe speculation and vacancy tax, your payment is due by the first business day of July. You can pay online, at the bank, by cheque, or in person at a Service BC centre.
Please get in touch with us if you have any questions pertaining to your situation.