What is the Speculation Tax?
The 2018 budget released by the B.C. Government introduced a new tax on Real Estate effective in the 2018 tax year called Speculation Tax.
Real estate prices in B.C. have increased substantially in the last couple of years and there is increased interest and ownership of B.C. real estate by foreign parties. The speculation tax has been introduced by the B.C. Government as an attempt to help address this.
The speculation tax is designed to target foreign and domestic home owners in B.C. who hold non-owner-occupied properties which are not qualifying long-term rental properties. This tax will initially apply to homes in Metro Vancouver Regional District (excluding Bowen Island), the Capital Regional District (excluding the Gulf Islands), Chilliwack, Abbotsford, Mission, Nanaimo, Lantzville, Kelowna and West Kelowna.
Despite its name and its intended target, this speculation tax will be imposed annually on more than just speculation properties. B.C. residents who own vacation properties in these specified areas or other B.C. residents who own a second property which is not rented out for at least six months of the year will be subject to this speculation tax. However, B.C. Residents are eligible for a tax credit which is immediately applied against the speculation tax. The tax credit will make homes worth less than $400,000 exempt for B.C. residents.
The tax rate for 2018 is $5 per $1,000 of assessed value. This rate will increase to $20 per $1,000 of assessed value in 2019 for foreign investors and $10 per $1,000 of assessed value in 2019 for out of province Canadian residents. Home owners will receive their 1st speculation tax notice in the fall of 2018.
Dawn Loeffler, BA (Hons), CPA, CA
Manager, Gilmour Group CPA’s
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