The BC government has released specific details regarding its new speculation tax, and insists that over 99 per cent of British Columbians won’t have to pay the levy.
Introduced last month as part of the NDP government’s 2018 budget, the tax is intended to target speculation in the housing market and free up vacant homes for renters and home buyers living in BC — particularly in regions like Metro Vancouver, where vacancy rates are close to 0 per cent.
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The new levy is one of 30 points outlined in the government’s new housing plan to address affordability challenges in the province.
“The speculation tax focuses on people who are treating our housing market like a stock market,” says BC Minister of Finance Carole James in a press release published Monday.
However, when the loosely defined tax was announced it was met with public scrutiny as many worried the levy would impact British Columbians who own second homes.
To put those concerns to rest, on Monday, the BC government unveiled details about the tax, including thresholds, exemptions and geographic refinements.
Here are 10 key facts you should know about BC’s new speculation tax:
1. Beginning fall 2018, the tax will apply to: Metro Vancouver, the Capital Regional District (excluding the Gulf Islands and Juan de Fuca), Kelowna and West Kelowna, Nanaimo-Lantzville, Abbotsford, Chilliwack and Mission. “We have focused the geographic areas so this tax only applies in urban housing markets hardest hit by this crisis,” says James.
2. According to the government, over 99 per cent of British Columbians will be exempt from the tax because the majority of homes in the province’s urban centres will either be owner-occupied or a long-term rental.
3. This year, the tax rate for all eligible properties is 0.5 per cent on the property value.
4. In 2019 and subsequent years, the tax rate will be: two per cent for foreign investors and satellite families (households with high worldwide income that pay little income tax in BC), one per cent for Canadian citizens and permanent residents who don’t live in BC and 0.5 per cent for British Columbians who are Canadian citizens or permanent residents.
5. British Columbians’ primary residences and qualifying long-term rentals are exempt from the tax. In 2018, homes will need to be rented out for at least three months to qualify for an exemption. In 2019, properties will need to be rented out for at least six months out of the year in increments of at least 30 days to be exempt.
6. Foreign homeowners and satellite families are subject to the tax. However, they can avoid the tax by renting out their property.
7. Canadians who own a home in BC but keep their primary residence in another province are also subject to the tax, but can avoid it by renting out their property.
8. British Columbians who are Canadian citizens or permanent residents, and are not part of a satellite family, will be eligible for a tax credit that is applied against the speculation tax on a second home. This credit will offset a total of $2,000 in speculation tax payable and will ensure that British Columbians don’t pay tax on a second home valued up to $400,000.
9. People with homes and cottages outside the designated areas will not have to pay the speculation tax.
10. There will be exemptions for special circumstances, including if the owner or tenant is undergoing medical care, absent for work purposes or if the registered owner is deceased and the estate is in the process of being administered.