Speculation Tax Update
Director Items From Mar 08 2018 – Discussion on Speculative, Vacant Home, Foreign Buyers and Payroll Tax implications re: Provincial Budget
Speculation Tax Update
Mar. 28, 2018
Finance Minister Carole James has announced several changes to the speculation tax, focusing its geographic scope of application on urban centres, introducing different rates based on residency and citizenship, and creating several exemptions. The speculation tax will be introduced into legislation in the fall sitting of the legislature.
Local governments in several communities have been advocating for changes to the province’s vacancy-focused speculation tax. The key changes to the tax are as follows:
- Geographic scope of application: The tax will apply in the Metro Vancouver Regional District, excluding Bowen Island and Electoral A except for UBC and the Endowment lands; the Capital Regional District, excluding the Gulf Islands and Juan de Fuca; Kelowna-West Kelowna; Nanaimo-Lantzville, excluding Protection Island; and Abbotsford, Chilliwack, and Mission.
- Rate and credit design: In 2018, the tax rate will be 0.5% on property value. In 2019 and subsequent years, it will be 2% for foreign investors and satellite families, 1% for Canadian citizens and permanent residents not living in B.C., and 0.5% for British Columbians who are Canadian citizens or permanent residents. A tax credit will be immediately applied against the speculation tax to offset a total of $2,000 for British Columbians who are Canadian citizens or permanent residents and not part of a satellite family. This will effectively exempt British Columbians from paying the tax on second homes valued up to $400,000.
- Exemptions – the tax will not apply to:
- Primary residences of British Columbians,
- Homes rented out for at least three months in 2018, and starting in 2019, homes rented out for at least six months in increments of 30 days or more,
- An owner or tenant undergoing medical care or residing in a hospital, long-term care, or a supportive-care facility,
- An owner or tenant temporarily absent for work purposes, and
- A property with a registered owner who is deceased, with the estate in the process of being administered.
In addition, owners of condos where strata corporations don’t allow rentals will be temporarily grandfathered, although limited information is available on how this will be implemented.
UBCM’s recent housing strategy proposed several measures aimed at addressing speculative demand, including a tax to penalize rapid speculative resale.
