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As part of Budget 2018, the British Columbia Ministry of Finance recently announced that they will be targeting property speculators with a new tax, effective for the 2018 tax year.

Property speculation is defined as "the buying or selling of property in the hope of deriving capital gains," a practice which the BC government hopes to curb in overheated markets through the implementation of this new tax. The tax is designed to target foreign and domestic speculators, as well as homeowners who hold vacant property in designated urban centres, yet will reportedly leave 99% of British Columbians exempt to the tax.

Exemptions to the speculation tax include:

  • Primary residences of British Columbians; and
  • Properties that qualify as long-term rentals. In 2018, homes must be rented out for at least three months to qualify as a long-tern rental. Starting in 2019 however, homes will need to be rented out for at least six months, in increments of 30 days or more to qualify for exemption.

The speculation tax will only apply to geographic areas hit hardest by the housing crisis, which include: Metro Vancouver, the Capital Regional District (excluding the Gulf Islands and Juan De Fuca), Kelowna, West Kelowna, Nanaimo-Lantzville, Abbotsford, Chilliwack and Mission. 

In 2018, all qualifying homeowners will be subject to a tax of 0.5% of the property value. In 2019 and subsequent years, the 0.5% will be maintained for British Columbians, while it will increase to 1% for Canadians from other provinces. Foreign investors and satellite families who have a high worldwide income, but pay little income tax in BC will see a hike to 2%. Additionally, any properties over $3M will see an increase in the tax rate for school taxes, potentially making residential "speculative" properties one of the highest taxes property classes in the Province.

Ex: Foreign-owned vacant home in Vancouver

Assessed Value   $2,000,000
Speculation Tax 2% $40,000
Vacancy Tax 1% $20,000
Property Tax 0.29% $5,800
TAX OWING   $65,800

 
If you are concerned you may be levied the speculation tax or have any questions regarding the recent legislative changes, please don't hesitate to David Nishi-Beckingham at dnb [at] aecpropertytax.com or by phone at 604.629.4643.

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