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The Speculation & Vacancy Tax

All owners of residential property in the designated taxable regions of B.C. must complete an annual declaration. Over 99% of British Columbians are estimated to be exempt from the tax.

How the Tax Will Be Charged If You’re Not Exempt

The speculation and vacancy tax rate varies depending on the owner’s tax residency and whether the owner is a Canadian citizen or permanent resident of Canada, or a member of a satellite family.

By levying the highest tax rate on foreign owners and satellite families (those who earn a majority of income outside the province and pay little to no income tax in B.C.), the speculation and vacancy tax is a way to make sure these property owners are paying their fair share in taxes.

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

Tax Rates for Speculation and Vacancy Tax

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

This new annual tax is designed to:

  • Target foreign and domestic speculators who own residences in B.C. but don’t pay taxes here
  • Turn empty homes into good housing for people
  • Raise revenue that will directly support affordable housing

The speculation and vacancy tax applies 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.

International Income and Speculation and Vacancy Tax

When you complete your declaration for the speculation and vacancy tax, 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.

Examples:

  • One spouse is a Canadian citizen but isn’t the home owner, while the other spouse is the owner but isn’t a Canadian citizen or permanent resident. Around 70% of their combined worldwide income is earned outside of Canada and is not reported on a Canadian income tax return. Both spouses are members of a satellite family.
  • One spouse owns the home but is out of the country most of the time, earning 100% of his income from outside Canada with no obligation to report to Canada Revenue Agency. The other spouse and their children live in their B.C. house. Since the combined income of these two spouses is entirely unreported on Canadian tax returns, they are both considered members of a satellite family.

Individuals Exemptions for Speculation and Vacancy Tax

There are a couple of exemptions for individuals, one of them is when a property has rental restrictions

When a covenant or a strata bylaw prevents the property from being rented out in a manner that would allow a rental exemption, all owners of a property are exempt for the 2018 and 2019 tax years only, as long as the rental restriction was in place on or before October 16, 2018. The owner must also have purchased the property before that date.

Example: A B.C. resident purchases a strata property in August 2018 as an investment, but under the strata bylaws they are not allowed to rent it out. Even if the home is empty, they qualify for this exemption for 2018 and 2019, but will have to pay the tax in 2020 if it remains unoccupied.

Some of the area’s the Speculation & Vacancy Tax doesn’t apply are First Nation Land, RDCO, Peachland, Lake Country, Coldstream, Penticton and Vernon.