Here’s what you need to know about the Speculation Tax, and how you can avoid it.
The Speculation and Vacancy Tax was enacted by the B.C. government to reduce the number of vacant homes in B.C.’s major urban centres.
This annual tax applies to some residential property owners in Metro Vancouver (excluding Bowen Island, Lions Bay, and Electoral Area A, but including UBC and the Endowment Lands); Capital Regional District (excluding Salt Spring Island, Juan de Fuca, and Southern Gulf Islands); as well as Abbotsford, Chilliwack, Mission, Kelowna, West Kelowna, Nanaimo, and Lantzville.
All property owners in the above-mentioned taxable regions must complete a declaration, even if they are eligible for an exemption.
Who is exempt from the Speculation Tax?
In general, property owners are eligible for an exemption if the property is:
– A principal residence
– Occupied by a tenant for at least six months of the year; short-term rentals (less than one-month lease terms) do not count toward this calculation
– Uninhabitable, under construction, or undergoing extensive renovations
– Bought or inherited during the taxable year
– Subject to rental restrictions and purchased before October 16, 2018 (2021 will be the last tax year for this restriction)
– Is vested in a trustee in bankruptcy
Or, in one or more of the following scenarios:
– Owners have separated during the taxable year
– Owner, partner, or child has moved temporarily for medical treatment during the taxable year
– Recent death of one of the owners
For further information on exemptions, visit the Exemptions for Individuals page on the B.C. Government’s Speculation and Vacancy Tax website.
What should I know about tenants and the Speculation Tax?
The B.C. Government clarifies the tenancy exemption–as it relates to a Canadian citizen or permanent resident versus a foreign owner–by distinguishing between an Arm’s Length Tenant from a Non-Arm’s Length Tenant and four scenarios:
1) Arm’s Length Tenant
In general, any rental property owner is eligible for an exemption if the tenant is at Arm’s Length. An Arm’s Length Tenant has no personal advantage or relationship with the owner; he/she pays rent, has a written tenancy agreement in place, and establishes the rental property as a principal residence.
2) Non-Arm’s Length Tenant / Canadian or Permanent Resident Owner
A Canadian citizen or permanent resident with a Non-Arm’s length Tenant (friend or family member) can be eligible for an exemption, even if the tenant does not pay rent or have a written tenancy agreement in place; however, the tenant must live at the property the majority of the time each month. Note: an owner’s spouse or child cannot be considered a tenant.
3) Non-Arm’s Length Tenant / Foreign Owner
A foreign owner with a Non-Arm’s Length Tenant can qualify for a tax exemption if the tenant meets all of the following criteria:
- A Canadian citizen or permanent resident,
- A resident of BC for income tax purposes at the end of the last day of the calendar year,
- Not a member of a satellite family (where the majority of combined income is earned outside of Canada and not reported on a Canadian tax return), and
- Has 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.
4) Non-Arm’s Length Tenant / Canadian and Foreign Co-owners
When one owner is Canadian and the other is foreign, and the tenant is at Non-Arm’s Length, each of the owners is entitled to exemptions based on their specific circumstances.
For a more detailed breakdown of the tenancy exemptions, visit the Tenancy Requirements page on the B.C. Government’s Speculation and Vacancy Tax website.
What is the current B.C. Speculation Tax rate?
If an owner does not qualify for an exemption, the B.C. Speculation Tax is applied as follows:
Canadian citizen or permanent resident: 0.5% of property’s assessed value
Foreign owner or member of a satellite family: 2% of property’s assessed value
Key Dates for 2021:
Mid-February 2021: Declaration arrives via mail
March 31, 2021: Declaration due
April-May 2021: Tax notices mailed
July 2, 2021: Tax due (if applicable)
How do I complete the Speculation Tax declaration?
The declaration can be completed online at the B.C. Government’s Speculation & Vacancy Tax website, or via phone at 1.604.660.2421 or 1.833.554.2323 (toll-free)
- Each named owner must complete a separate declaration, even as a spouse.
- To declare on time and avoid penalty, ensure the mailing address on file with BC Assessment is up-to-date.
The BC Speculation and Vacancy Tax continues to evolve on a yearly basis. If you have questions about how this tax applies to your investment property, call us at 604.260.9955.
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