Whether you are considering the purchase of your first property, subsequent property, recreation or investment property, there are many tax considerations. Here are a few of them:
SPECULATION AND VACANCY TAX
Only those owning residential property located in a designated taxable region in B.C. must complete a declaration for the speculation and vacancy tax which is paid annually. Regions include Metro Vancouver, Fraser Valley, locations on Vancouver Island and Kelowna. This tax varies depending on the owner’s residency. For 2019 onwards the rate is 2% for foreign owners/satellite families, and 0.5% for Canadian citizens or permanent residents who are not members of a satellite family.
G.S.T. of 5% (subject to any rebates) is payable on the purchase price of newly constructed or substantially renovated residential homes. If the buyer plans to reside in the new home as their primary place of residence, then they may be eligible for a rebate of 36% of the GST, but only on homes priced up to $450,000 (sliding scale between $350-$450,000) and there is no rebate on any home over $450,000. There is also a rebate available if the buyer is planning to rent out the home, and meets all the conditions. For more information on these rebates, visit the Government of Canada website.
VANCOUVER’S EMPTY HOME TAX
In the City of Vancouver, separate from the Provincial Speculation and Vacancy Tax, empty properties are subject to a tax of 1% of the property’s assessed taxable value, payable yearly with a declaration required to be filled out each year. If you own a home in Vancouver and don’t live in it – but have tenants at least six months of the year – this tax shouldn’t apply to you.
PROPERTY TRANSFER TAX
This is a provincial tax payable when purchasing a property in BC. calculated at 1% on the first $200,000.00 of the property’s fair market value, 2% on the amount between $200,000 and $2,000,000, and 3% on the amount between $2,000,000 and $3,000,000, and 5% of the remaining fair market value. There are exemptions for first time Buyers meeting certain criteria (and a maximum purchase price of $500,000 with partial exemption up to $525,000). If you are a potential first-time buyer, read our article on the First-Time Home Buyer Incentive (FTHBI) program. In addition, there is a newly built home exemption where the purchase price must not exceed $750,000 for the full exemption, and a partial exemption available between $750,000 and $800,000. Visit the Government of BC website for in-depth information.
FOREIGN BUYERS PROPERTY TRANSFER TAX
This is a tax of 20% of the purchase price, and must be paid by anyone who is not a Canadian citizen or a Permanent Resident, or registered under the Provincial Nominee Program. Again, this applies to certain areas within the province, however, includes Greater Vancouver, Fraser Valley, Central Okanagan, and areas on the Island.
ANNUAL PROPERTY TAX
Not to be confused with all these other taxes; if you own a property you will receive a tax notice from your municipality every year which is due mid-year. Rebates exist for homes occupied as a primary residence, seniors and those with disabilities.
As taxes and rules change and every situation is unique, please note that the above information is not intended to be professional advice, and should not be relied upon without consulting a legal/accounting professional. Further tax considerations may also arise (including GST and Capital Gains) for the sale of property…another day, another topic!