Vacancy taxes

by Alina Nikolaeva
Vancouver Tax Corporate Commercial Lawyer

There are two regimes of vacancy tax that apply to under-utilized residential properties in BC, one applies to taxable regions across BC, and the other applies to Vancouver only:

• Speculation and Vacancy Tax Act[SBC 2018] CHAPTER 46, a provincial legislation, imposes a tax on residential property located within BC’s major urban centres; and
• Vacancy Tax (Empty Homes Tax) By-law 11674, a municipal by-law, imposes a tax on residential property in Vancouver.

These are enacted by separate laws, each with its own distinct exemptions and requirements. Qualifying for an exemption for one does not necessarily mean an exemption will be available from the other.

 

Speculation And Vacancy Tax Act, BC

Annual Tax

Property owners will have to make an annual declaration. If any speculation and vacancy tax is owing, payment will be due by July 2.

Targets

• Foreign owners and satellite families
  • Foreign owners are property owners who are not Canadian citizens or permanent residents.
  • A satellite family is an individual, together with his or her spouse, who do not report a majority of their income on a Canadian tax return.
• Multiple owners on title – each owner will be required to file a property declaration.
• The owner is a corporation, a partner of a partnership or a trustee of a trust:
  • look through these entities and carefully consider the individual(s) that have the ultimate interest or control in the property.
  • If any such individual(s) is a foreign owner or member of a satellite family, this will have implications for claiming exemptions and on the tax rate you pay.
  • Even where such an individual resides within Canada but outside of BC, this may jeopardize the availability of certain exemptions.

Tax Rate

The tax is calculated as a proportion of the assessed value of the property:

• 5% for BC residents and Canadian citizens or permanent residents;
• 2% for foreign owners and members of satellite families.

 

Exemptions

All owners of residential property within a specified region will pay the speculation and vacancy tax unless an exemption can be claimed. There are a number of exemptions available, each of which require specific conditions to be met. The most common exemptions will include a situation where a property was:

• used as a principal residence;
• was rented out to a tenant (note that short-term rental arrangements do not qualify);
• a construction of a new home or under substantial renovations; or
• acquired within the year.

The specific requirements for each exemption should be carefully considered with special attention being paid to defined terms and interpretive rules. This is especially true where the owner includes a corporation, partnership or trust, or where any foreign owners, members of satellite families or non-B.C. residents are involved.

Tax Credits

Those that must pay the speculation and vacancy tax may be able to claim a tax credit on any income they have in B.C.

 

The Empty Homes Tax, Vancouver

Annual Tax

Property owners will have to make an annual declaration by beginning of February. If any tax is owing, payment will be due on the same date.

Targets

The Empty Homes Tax applies to residential properties in Vancouver left vacant for over 6 months in a calendar year to address housing shortages.

All homeowners in Vancouver are required to submit an annual declaration to determine if their property is subject to this tax. If a property is declared empty for the reference year, it will incur a tax based on its assessed taxable value for that year. Failing to declare results in automatic taxation and a penalty, false declarations can incur fines of up to $10,000 per day for ongoing offenses.

Tax Rate

Tax rate is a 3%.

Exemptions

• Homes used as a principal residence;
• Properties rented for at least 6 months of the year;
• Homes under construction, renovation, or rezoning;
• Special circumstances, like medical care or court orders.