Speculation and vacancy tax rate for foreign owners, satellite families rises to 2%

Carole James

AFTER a successful first year of targeting speculators, the speculation and vacancy tax’s (SVT) second year will see the tax rate for foreign owners and satellite families rise to 2%.

More than 99% of British Columbians will remain exempt. Additional exemptions will be provided for military families and water-only access properties.

“When we introduced the speculation and vacancy tax, our province was at the peak of a real estate crisis and moderation in the market was long overdue,” said Carole James, Minister of Finance. “Based on the data from the first year, we see the tax is working as it was designed to – capturing speculators, foreign owners and people who own vacant homes, while exempting more than 99.8% of British Columbians.”

In the second year of the SVT:

* The tax rate for foreign owners and satellite families will rise to 2% in 2019, up from 0.5% in 2018. Money raised through the tax funds affordable housing in areas where the tax applies.

* Property owners will benefit from a retroactive exemption for Canadian Armed Forces members and spouses while in active service, and a retroactive exemption for people who own properties accessible only by water.

* A longer phase-out will be provided for temporary exemptions:
* The exemption for rental restricted stratas will now end December 31, 2021.

* The exemption for strata accommodation properties will now end December 31, 2021.

* The exemption for vacant land will end December 31, 2019.

To prevent tax avoidances, the ministry is increasing the identification and information required of corporations, trusts and partnerships, and foreign owners. These changes are being put in place to improve efficiency and compliance and will not affect the vast majority of British Columbians.

“After hearing from local leaders, communities and those impacted by the housing crisis, we took a close look at how we can build on the success of our first year – and with these new improvements, we’ve done just that,” said James. “I recognize there are a variety of views on the speculation and vacancy tax. There are those who oppose the tax and others who want to implement additional tax. I look forward to continuing discussion as we work together to tackle the housing crisis.”

These improvements will come into force by regulation. Residential property owners will be able to claim the exemptions or amend their 2018 declaration mid-January 2020.

Quick Facts:

* In its first fiscal year, the tax is forecast to raise $115 million in revenue to help fund affordable housing projects where the tax is applied.

* Data from the first year shows that 90% of the revenue came from foreign owners, satellite families and Canadians living outside of B.C.

Learn More:

To learn more about the speculation and vacancy tax and exemptions, visit: gov.bc.ca/spectax

SVT call centre: 1 833 554-2323 toll-free or 1 604 660-2421 (outside North America)

BACKGROUNDER
The speculation and vacancy tax: what’s new in 2020

The speculation and vacancy tax (SVT) helps turn empty houses into homes for people, discourages real estate speculation and ensures homeowners who report the majority of their income outside of Canada pay their fair share of taxes.

Ahead of the 2020 declaration process, property owners are being notified of the following:

Tax rate increase for foreign owners and satellite families: In its inaugural year, all SVT taxpayers were subject to a tax rate of 0.5%. In the second year, the tax rate rises to 2% for foreign owners and satellite families.

Water-access only properties: Owners who have residential properties that cannot be accessed by road and are not within a short walking distance to a public or private road will be exempt from paying the tax. This change is retroactive to the 2018 tax year.

Canadian Armed Forces (CAF) members: CAF members and their spouses will now qualify for a stand-alone exemption on their residence if they are unable to reside in their home. There is no limit on the number of years that the exemption may be claimed by a CAF member and their spouse, but this exemption can only be applied to one property. This change is retroactive to the 2018 tax year.

Vacant land: All owners who qualified for the vacant land exemption in 2018 will continue to qualify in 2019 if they still meet all exemption criteria. The exemption will now end Dec. 31, 2019.

Strata accommodation properties: All owners of a strata accommodation property, also known as strata hotels, are exempt. The property must meet the definition of strata accommodation as defined in the Assessment Act. The exemption will now end Dec. 31, 2021.

Strata condominiums with rental restrictions: Strata condo property owners who were restricted from renting when the SVT became law will continue to qualify for an exemption. This is a grandfathering exemption, which means new owners and owners subject to new rental restrictions do not qualify. The exemption will now end Dec. 31, 2021.

New declaration requirements to prevent tax avoidance: Every corporation, business partnership or trust will be required to provide the same information on their interest holders as required by individual owners. Corporations that do not have corporate interest holders will be required to verify this in their declaration. In addition, foreign corporations will be required to provide a Canadian business number or certify that they do not have a business number, and Canadian spouses of foreign owners will be required to provide their social insurance number.