Some good news – the BC government announced extensions to some temporary exemptions to the BC Speculation and Vacancy Tax (the “Spec Tax”) tax. They also provided some clarity on other exemptions.
What is the Spec Tax again? It is a BC tax* that started in 2018 as part of BC’s housing affordability strategy to try and rein in speculators and foreign owners and reduce the number of unoccupied residences. You must complete an annual declaration if you own BC residential real estate in Metro Vancouver, Abbotsford, Chilliwack, Mission, Victoria, Lantzville, Nanaimo, Kelowna and West Kelowna, even if it is your personal residence or is rented out.
* 0.5% of assessed value increasing to 2.0% for 2019 for foreign owners and “satellite” families (i.e. that declare less than 50% of their total combined household income for the year on a Canadian T1 return)
Here are some updates and clarifications:
Declarations: Spouses declare as individuals, not a partnership
Where there are multiple owners of a home, each owner must complete a declaration. This includes married or common law spouses. If a parent co-owns a home with an adult child then they both need to file a declaration. If the adult child lives in the home then the child claims the principal residence exemption and the parent claims the tenancy exemption. If an adult child is added on title to his/her parent’s home then, again both must file a declaration. Partnership, as it relates to the Speculation and Vacancy Tax, concerns only business partnerships where you own the property on behalf of the partnership.
Generally, you’re exempt if the property in question is your principal residence ¾ the place you spend the most time in a calendar year (unless a foreign owner or member of a “satellite” family) However, if you moved out of your home to enter a residential care facility, for medical reasons (for you or a family member), for restoration or renovation work on the home or because your residence was uninhabitable, you could be eligible for a previous residence exemption for up to 2 years. Your secondary residence could also be protected from the tax if you, your spouse or your child occupies it periodically to be closer to a medical treatment facility.
There are other possible exemptions for the year you buy or inherit the property, death and every 10 years for other reasons (e.g. temporary work or travel).
Exemptions also apply in the event of separation or divorce. You can claim an exemption for the year you separate (if you live away from your spouse for at least 90 days and don’t reconcile) as well as the following year (if you haven’t finalized your division of family property and don’t reconcile).
A full list of individual exemptions can be found here.
New exemptions announced:
New exemptions have been announced for Canadian Armed Forces members and their spouses, where the military member is away from B.C. for active service. Homeowners whose property can only be accessed by water will receive retroactive exemptions.
Longer phase-out period for temporary exemptions:
The latest updates include some good news for owners of secondary condo properties. Temporary exemptions have been extended for rental restricted stratas (to December 31, 2021). Therefore, if your condo building has a rental ban or full rental limit then you may be eligible for an exemption (provided you bought your condo before October 16, 2018 and the rental restriction was also in place on October 16, 2018) and strata accommodation properties (to December 31, 2020).
The exemption for vacant land for 2018 only was not extended.
With these changes in mind, get ready to file your declaration beginning January 20th, 2020. Contact your DMCL advisor here.