Do you, your corporation, or any other legal entity you own or have a beneficial ownership in ‐ own residential real property in BC (rented, occupied yourself, or vacant)? If so, you have an important designation to make by March 31, 2019!
The BC Speculation and Vacancy Tax (SVT) is intended to target foreign and domestic home owners who do not pay income tax in BC. The SVT rate is 0.5% of assessed value which increases to 2% for 2019 for properties in certain areas. The BC government will then introduce a refundable credit to offset the SVT to those who do not otherwise qualify for the up‐front exemption, but still pay taxes in BC.
Speculation and Vacancy Tax — Current Rules
Taxpayers who own property in certain geographic regions of British Columbia may be subject to the SVT as follows.
0.5% of the property’s assessed value for all properties subject to the tax.
For 2019 and subsequent years:
- 0.5% for B.C. residents, Canadian citizens and permanent residents other than individuals whose “unreported income” (which includes their spouse’s unreported income) exceeds the individual’s “reported income” (which includes their spouse’s reported income) subject to income taxes in Canada in the preceding taxation year; and
- 2% for all other property owners that are not eligible for the 0.5% rate.
The SVT is levied on all registered owners in a calendar year unless the owner declares an exemption by March 31 of the following calendar year. Where there are two or more registered owners on title to the property, the rules stipulate that every owner must make the declaration.
To be exempt for 2018, registered owners must declare an exemption online or by phone by March 31, 2019 or they may face a tax liability, even if they would otherwise be entitled to an exemption.
Exemptions Are Available
B.C. property owners that are liable for the SVT may be eligible for one or more of the various exemptions available. Specifically, the rules include exemptions for principal residences, certain tenanted properties and properties under construction or renovation, amongst other types of property.
Principal residence exemption
There is a principal residence exemption available for B.C. residents that are eligible for the lower 0.5% rate and that reside in the property for a longer period in a calendar year than any other place.
Tenanted residential property exemption
Residential property that is rented to a tenant may also qualify for an exemption from the SVT. This exemption is generally available to certain publicly held entities, B.C. residents, Canadian citizens, permanent residents and certain foreign owners that meet certain strict conditions. To qualify for the exemption for 2018, the property must be rented to a tenant for at least three months in the calendar year. For 2019 and subsequent years, the property must be rented for at least six months in the calendar year. Each rental period must not be less than 30 days (i.e., to eliminate any type of short‐term arrangements). The tenant must be an individual who generally resides in the property, and may have an arm’s length or non‐arm’s length relationship with the registered owner, provided specific conditions are met.
Exemptions for residential property under construction or renovation
There are also exemptions under the SVT rules for development property at various stages of the development cycle, from the permitting phase through to completion. These exemptions may be available even if the property is vacant (and cannot be occupied for at least 90 days in the year), including vacant heritage property and new inventory property. For phased developments, all phases must be owned by the same person or a “related person” within the meaning of the federal tax rules.
For those that do NOT qualify for the exemption or have missed the filing deadline, the SVT applies and the first payment is due July 2, 2019.
ROMANOVSKY & ASSOCIATES LLP
CHARTERED PROFESSIONAL ACCOUNTANTS
Keith M.J. Anderson* BCom, CPA, CA-IT, CITP
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