It will be up to homeowners to apply for exemptions, with a deadline of March 31.
All homeowners in B.C.’s largest urban centres will need to apply for exemptions from the province’s new speculation tax or receive a bill, whether they are speculators or not, the government announced Tuesday.
Letters outlining the first speculation tax fees and exemption processes will begin arriving at all homes in Greater Victoria, Nanaimo, Kelowna and Metro Vancouver (excluding Bowen Island and Lions Bay, but including Abbotsford, Mission and Chilliwack) starting this week.
It will be up to all homeowners to apply for exemptions, with a deadline of March 31. Those who don’t apply, or qualify, will be sent tax bills due to be paid by July 2. The opt-out process will become an annual event for property owners under the new speculation tax rules. People who pay mistakenly can get a rebate within six years, according to the ministry.
The NDP government’s speculation tax was announced in the February 2018 budget and described as a way to encourage owners of empty residences to put them onto the rental market, or sell, in areas where housing is unaffordable and rental vacancy rates are low.
Because the tax is retroactive, the first letters will actually be for taxes incurred in the 2018 calendar year — before the tax rules were even finalized.
The tax rate is 0.5 per cent of a home’s assessed value in 2018, which would be $5,000 a year for a property assessed at $1 million. Starting in 2019, the rate rises to two per cent for out-of-province owners, foreigners and satellite families (households where more than 50 per cent of income comes from outside Canada).
Owners are exempt from the tax if it is their principal residence, they rent it at least six months of the year (only three months is required in 2018), they are disabled, the property was just inherited, it’s valued under $150,000, or a person was away and it was vacant due to medical reasons, residential care, work or spousal separation.
Condos and apartments in buildings where stratas ban rentals are also exempt, but only for 2018 and 2019, to give stratas time to change their bylaws, according to the ministry. Exemptions are available for First Nations, local governments, charities, co-ops, some not-for-profit organizations, and developers working on construction or renovation of property.
British Columbians with second homes who aren’t exempt will still get a credit intended to cover the tax on the assessed value up to $400,000, with the remaining value of the property then taxed at the full rate.
The full detail on the exemptions available:
Individuals Exemptions for Speculation and Vacancy Tax
People who own residential property within designated taxable regions of B.C. may be eligible for an exemption from the speculation and vacancy tax.
Shared Ownership
When more than one owner is on title for a residence in a taxable region, each owner claims their relevant exemption as an individual. Different eligibility requirements may apply to different owners.
Example: Two parents co-own a house in Victoria with their adult child. The parents live in Alberta. The child claims the principal residence exemption and the parents claim the tenancy exemption for family or other non-arm's-length persons.
Example: An elderly parent adds their adult child on title to the parent’s condo in Vancouver for end of life planning. The parent still lives in the condo and the child lives in Prince George. The parent claims the principal residence exemption and the child claims the tenancy exemption for family or other non-arm's-length persons.
Exemptions
The following exemptions are available for individuals:
- Principal residence exemptions
- Occupied by a tenant
- Can’t live in the residence because it’s uninhabitable
- Secondary residence close to medical treatment facility
- Just bought or inherited the property
- Separation or divorce
- Bankruptcy
- Recent death of owner
- Property is in a trust created by a will for a minor
- Property has rental restrictions
- Property is a strata hotel
- Property includes a licensed child daycare
- No residence on the property
- Other exclusions from the tax
Generally, an owner is exempt from the tax if the residential property is their principal residence, which is the place where the owner lives for a longer period in a calendar year than any other place. People who have multiple homes can only claim the principal residence exemption on the home they live in for the longest period in the calendar year.
Spouses cannot claim two different principal residence exemptions unless specific situations apply, such as spouses living apart for work or medical reasons or because of separation or divorce.
To be eligible for a principal residence-related exemption, an owner must be a Canadian citizen or permanent resident of Canada who’s a B.C. resident for income tax purposes and isn’t part of a satellite family.
The following circumstances are also eligible for the principal residence exemption:
Lived in home before going into residential care
An owner is exempt from the tax for up to two years if they lived in the home before entering a residential care facility due to age, disability, addiction, illness or frailty. The residential care facility must offer services such as daily meals, housekeeping or nursing care.
The property must have been the owner’s principal residence:
· In the calendar year before they entered residential care, or
· In the preceding year if any of the following exemptions applied in the calendar year before they entered residential care:
o Lived in the home before going into residential care
o Couldn’t live in the residence because of heritage or conservation work
o Couldn’t live in the residence because of construction or renovation work
o Couldn’t live in the residence because it’s uninhabitable
o Away from home for medical reasons
o Away from home for any other reason (valid once every ten years)
Example: An owner lives in a home through 2017, then in 2018 has to move to a residential care home for the elderly. They qualify for this exemption.
An owner is exempt from the tax if they’re away from their home to receive medical treatment for themselves, their spouse or minor child. The medical condition must be certified by a medical practitioner. The owner must show that the treatment is impractical to obtain closer to the previous principal residence of the person receiving the medical treatment. This exemption is available for up to two years for the same medical condition.
The property must have been the owner’s principal residence:
· In the calendar year before they left to receive medical treatment for themselves, their spouse or minor child, or
· In the preceding year if any of the following exemptions applied in the calendar year before they left:
o Lived in the home before going into residential care
o Couldn’t live in the residence because of heritage conservation work
o Couldn’t live in the residence because of construction or renovation work
o Couldn’t live in the residence because it’s uninhabitable
o Away from home for medical reasons
o Away from home for any other reason (valid once every ten years)
Example: A homeowner lives in their home up to 2018 and then has to stay in a hospital for January to August 2019 after being injured in a serious traffic accident. They qualify for this exemption for 2019.
Person with a disability lives in the residence
Owners of a property are exempt if a person with a disability lives there as their principal residence as defined under the Canada Pension Plan, Employment and Assistance for Persons with Disabilities Act, or the federal Disability Tax Credit under the Income Tax Act.
Example: Co-owners of a home have a paraplegic son who uses a wheelchair. They don't live in the home but the son lives there as his principal residence. They qualify for this exemption.
Spouses who live apart for work reasons may be able to claim a principal residence exemption on an additional home. Owners will only qualify if one of the following two conditions apply:
· One principal residence is at least 100 km closer to the workplace than the distance between the other principal residence and the workplace; or
· One principal residence is on Vancouver Island and the other residence is not on Vancouver Island
Example: One spouse lives in their home in Vancouver as his principal residence while another lives in another home they own in Victoria as her principal residence because she works in Victoria. They qualify for this exemption for both of their homes.
Living apart from spouse for medical reasons
Spouses who live apart for medical reasons may be able to claim principal residence exemptions on an additional home. To qualify:
· A medical practitioner must certify that an individual has a health condition, and
· The owner must provide information regarding why the condition prevents them from residing in their spouse’s principal residence
Example: Two spouses in Abbotsford must live apart when one must move to a home in Vancouver where they receive long-term medical treatment. A doctor signs a physician certification form and they are eligible for the exemption for the homes they own in Abbotsford and Vancouver.
Lived in the residence before moving out of province
An individual who had been living in the home but moves out of the province before the end of the year can still claim an exemption, even if they were not a B.C. resident for tax purposes at the end of the year.
Example: A B.C. homeowner moved out of their home in October 2018 and was a resident of Ontario at the end of 2018, but was not able to sell the house by the end of the year. They would be eligible for this exemption for their previous residence in B.C.
Away from home for other reasons (valid once every ten years)
A B.C. resident can claim a principal residence exemption if they’re away from their principal residence for an extended time or no longer living in it, unless they are incarcerated. This exemption can only be used once every ten years.
The property must have been the owner’s principal residence:
· In the calendar year before they left their home for an extended time, or
· In the preceding year if any of the following exemptions applied in the calendar year before they left:
o Lived in the home before going into residential care
o Couldn’t live in the residence because of heritage conservation work
o Couldn’t live in the residence because of construction or renovation work
o Couldn’t live in the residence because it’s uninhabitable
o Away from home for medical reasons
Example: A B.C. homeowner lives in their principal residence up to 2018 then takes a one-year job in Northern B.C. in 2019 before returning to their home. They qualify for this exemption for 2019.
Contact us if you have any questions.
Owners of homes occupied by a renter or by family or other non-arm's-length persons for at least six months of the year in increments of one month or more at a time may be exempt (three months for 2018). For the owner to be eligible for the exemption, tenancy requirements must be met. Review these requirements and the tenancy examples before completing the declaration to ensure the correct requirements are met.
All owners of a property may claim an exemption if no one can live in a residence because it’s uninhabitable due to a hazardous condition or because the residence has been substantially damaged or destroyed. To be eligible, there must have been at least 60 consecutive days in the year when no one could live there. This exemption is available in the year the property became uninhabitable, and in the following year if the property remains uninhabitable for at least 60 days in the second year.
Example: A home is damaged by a fire in 2018 and cannot be inhabited for four months until all repairs have been completed, which will require two months of work in 2018 and two months of work in 2019. The homeowners are eligible for this exemption for both 2018 and 2019.
An owner is exempt for a calendar year on a secondary residence if:
- It is periodically occupied by the owner (or the owner’s spouse or child) so they can receive medical treatment required by a medical practitioner, and
- The treatment facility is close to that second home
This exemption requires written documentation about the medical condition from a medical practitioner.
Example: A family buys a second home near a treatment facility so the family can have a place to live while their child is undergoing a lengthy medical procedure and recovery period. They are eligible for this exemption for each year in which they occupy the home temporarily because of their child’s medical treatment nearby.
Owners are exempt in the year they bought or legally inherited the property.
A newly bought property is exempt if you paid the property transfer tax or didn't have to pay the property transfer tax for one of the following reasons:
- First-time home buyers’ exemption
- Newly built homes exemption
- Reversion, escheated or forfeited land exemption
- Transfers to or from a trustee in bankruptcy
- Transfer of land by Public Guardian and Trustee
- Transfer to a veteran or veteran's spouse
Example: An owner purchased a property in March 2018 and paid property transfer tax on the transaction. For the 2018 tax year, the owner may claim the year of purchase exemption. In 2019, the owner must claim a different exemption or else they will be subject to the tax.
Example: A B.C. resident inherits a home in 2019 from his late uncle’s estate but doesn’t plan to move into it until 2020. He is eligible for this exemption for 2019.
Married couples, or common-law spouses who have been living together in a marriage-like relationship for at least two years, are eligible for an exemption on family property if they have separated and live apart (due to a breakdown in a spousal relationship) for at least 90 days in a calendar year.
- Couples are eligible for the exemption in the year they separate if they live apart for at least 90 days that year and they don’t reconcile
- Couples who separate less than 90 days from the end of the year will be eligible for an exemption the following year if they don’t reconcile
- Couples can claim the exemption for a second year if they have not finalized their division of family property and remain apart and do not reconcile.
A bankrupt owner is exempt from the tax if the owner's property has vested with a trustee in bankruptcy for at least 60 consecutive days in the calendar year. A trustee in bankruptcy is exempt from the tax for property vested with the trustee as of December 31.
If an owner of a property dies in a calendar year, all owners of the property at the time of death are exempt in the year of death and the immediately following calendar year. The owner’s personal representative is also exempt, even if they weren’t on title at the time of the recent death.
Example: A married couple co-owns a second home. If one spouse dies in 2018, the surviving spouse is eligible for this exemption for 2018 as well as for 2019.
The speculation and vacancy tax does not apply to a testamentary trust established by a deceased parent or guardian for the benefit of their minor child.
Example: A parent in Lantzville, B.C. passes away and leaves their investment property in trust for their minor child. The child’s trust would be eligible for this exemption.
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.
Owners of a strata accommodation property as defined in the Assessment Act, also called strata hotels, are exempt. This exemption is only available for 2018 and 2019 tax years.
Properties that include a licensed and operating daycare for children are exempt from the speculation and vacancy tax.
The speculation and vacancy tax won’t be applied for the 2018 tax year if there’s no residence on the property.
Example: An owner buys a vacant lot or vacant land in Nanaimo with plans to build a home on it later. They qualify for this exemption.
- Property has an assessed value under $150,000
- Property owner is a registered charity
- Property owner is a co-operative
- Property owner is a not-for-profit corporation and the property is used primarily for a charitable purpose
- Property owner is a municipality
- Property owner is an Indigenous Nation trustee
- Property owner is a government or related entity
- Property owner is a regional district or similar body, as defined in legislation
Questions? Contact the BC Government for help with your inquiries about the speculation and vacancy tax:
Darrell Wahl & Paul Herceg
Licensed Mortgage Advisor
Certified Reverse Mortgage Specialist
The Mortgage Centre | Select Mortgage Corp
106 – 3212 Jacklin Rd Victoria, BC V9B 0J5
Darrell Tel. 250-634-8948 Paul Tel. 250.661.6186 Fax: 250-391-2985
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