As anticipated, the BC Government rolled out several amendments to the property speculation tax following it’s controversial and hotly debated announcement.
The initial speculation tax hit homeowners who did not pay BC income taxes as well as BC income tax payers who owned second homes but did not rent them out on a long term basis. These homeowners would be required to pay a 2% tax on your homes assessed value every year.
This left many BC residents wondering if they were unintentionally targeted as speculators for owning vacation homes. While also targeting Canadian tax payers who lived in other provinces.
The tax has now been revised as follows.
The tax will only apply to the following areas:
- Metro Vancouver
- The Capital Regional District (excluding the Gulf Islands and Juan de Fuca)
- Kelowna and West Kelowna
- Nanaimo-Lantzville
- Abbotsford, Chilliwack and Mission
In 2018, the tax rate for all properties subject to the tax is 0.5% of the property value. In 2019 and subsequent years, the tax rates will be as follows:
- 2% for foreign investors and satellite families;
- 1% for Canadian citizens and permanent residents who do not live in British Columbia; and
- 0.5% for British Columbians who are Canadian citizens or permanent residents (and not members of a satellite family).
British Columbians with vacant second homes will be eligible for a non-refundable tax credit that is immediately applied against the speculation tax. This credit will offset a total of $2,000 in speculation tax payable. This tax credit will ensure that British Columbians do not pay tax on a second home valued up to $400,000.
Properties are considered A long-term rental if it is rented out for at least six months out of the calendar year in increments of at least 30 days.
Finance Minister Carole James summarized the changes saying “The speculation tax focuses on people who are treating our housing market like a stock market. We have focused the geographic areas so this tax only applies in urban housing markets hardest hit by this crisis.”
No further changes appear to be in the works. With Vancouver detached sales hitting a twenty year low in the month of February it’s hard to imagine this bodes well for a segment already under siege. This could also force the hand of satellite families and out of province homeowners who will face substantial taxation on a yearly basis.
James reiterated, “For too long, this housing crisis was allowed to escalate, and it has hurt working families, renters, students, seniors and others around the province. With this new tax, we’re targeting speculation in the housing market and freeing up vacant housing to be homes for British Columbians.”
