You may be familiar with the Empty Homes Tax and the Speculation and Vacancy Tax if you are a homeowner in or around the Vancouver area. The key difference between both taxes is that the first is only applicable to Vancouver whereas the latter is province-wide. As of December 31, 2019, significant updates were made to the Speculation and Vacancy Tax that may affect you. Therefore, continue reading to find out more.
Longer Phase-Out for Temporary Exemptions
- The exemption for rental restricted stratas will end on December 31, 2021 rather than December 21, 2019.
- The exemption for strata accommodation properties will end on December 31, 2021 rather than December 21, 2019.
These changes will affect taxpayers who own second properties in the province, like condos. Note that the first exemption is only applicable if the rental restriction was in place on or before the date that the draft for the tax guidelines were released (October 16, 2018).
Exemptions for vacant land ended on December 31, 2019. As a result, holding costs for developers will increase.
Increased Tax Rate
As of December 31, 2019, the tax rate increased to 2% from 0.5% for satellite families or foreign land owners. Therefore, read below to determine whether you qualify for a tax credit despite being ineligible for an exemption.
B.C. Home Owners
You may be eligible for a tax credit amounting up to $2,000. This is true if you are being taxed on a secondary property in the province. Note that this is per owner, per property, per year.
Satellite Families and Foreign Owners
A satellite family is an individual or spousal unit who do not report their total income worldwide on a Canadian personal income tax return. If eligible, satellite families and foreign owners may receive a tax credit equal to 20% of their B.C. income to reduce the tax owed.
Residential Rental Property
Your residential rental property may qualify for an exemption from the Speculation and Vacancy Tax. To be eligible, it must be occupied by a tenant for a minimum of six months in the calendar year. This has increased from three months in the 2018 guidelines.
New Exemptions for 2020
- Canadian Armed Forces members and spouses will receive retroactive exemptions while in active service.
- Similarly, individuals whose properties can only be accessed by water will also qualify for a retroactive exemption.
The Vancouver real estate market is constantly changing and may be difficult to navigate. Therefore, if you require a consultation or seek better understanding of the Speculation and Vacancy Tax, Sodagar & Co. is happy to help.