BC's Speculation Tax - Developers and property owners looking for certainty

BC's Speculation Tax - Developers and property owners looking for certainty

The proposed introduction of a new tax on certain properties in BC is intended to drive down soaring prices and push more housing stock onto the rental market. However, uncertainty surrounding the details of a plan that could significantly impact a substantial segment of the provincial economy is causing concern among developers and property owners.  


The BC Speculation Tax, announced in the province’s 2018 budget, targets the owners of unoccupied residential properties, with a particular emphasis on foreign and out-of-province residents currently paying little or no income tax in the province. According to the information provided to date by the BC government, the tax is intended to curb inflation in the residential real estate market in the province’s largest urban centres by levying additional costs on so-called speculators to “push them out of the market.”

Ultimately, the full impact of the tax won’t be known until legislation is introduced, debated and enacted. To understand the current proposal, read Grant Thornton's full overview

In the meantime, Grant Thornton is following developments in this area closely and can help you understand these risks, quantify what they may mean from your individual financial perspective, and formulate effective strategies to address them.



There are two recently announced items relating to real estate in British Columbia that I hope you will give careful consideration to.  Firstly, the anonymous tip line operated by the Real Estate Council of BC; secondly the Speculation and Foreign Buyers Tax. I would like to provide the following comments regarding each of these items.


Anonymous Tip Line

While it is reasonable that an individual wishing to make a complaint about a Licensee may remain anonymous to that Licensee, it is important that the person making the complaint be required to provide their name and contact information to the Tip Line. The reasons for this are twofold. 1. The facts leading up to the complaint may need further examination after the Licensee has been approached and 2. The nature of anonymous online comments and reviews highlights the inaccuracy and often outrageous claims people can be prone to make under the cloak of anonymity, or when they are simply ill informed.


Speculation and Foreign Buyers Tax

The implied message is that wealthy speculators hoping for capital gains are scooping BC real estate at the expense of BC residents in need of affordable housing.


Apparently there is evidence of wealthy people from other countries buying expensive real estate in Vancouver for speculation and perhaps money laundering. That is a separate issue that I am not concerning myself with here. 


My concern is the relatively small number of Canadians wanting to buy retirement homes in BC. When considering the weather alone in most of Canada, it is no wonder that people hope to retire to BC and perhaps spend part of the year here. These people are often the self-employed (farmers, small business people, restaurant workers, etc) who have no pensions to look forward to. They put their savings into homes in Victoria, Kelowna, (and the exempted Salt Spring Island) with the intention of moving here when they can afford to retire. People coming from other provinces for the occasional weekend may not pay income tax in BC, but they support local restaurants, entertainment venues and shops. For the most part, they are not competing for the type of housing we need. The government rules regarding mortgage qualification have made it harder for families of moderate means to buy a house. The working poor, the unemployed and the people with mental and physical challenges that preclude them working are not going to be buying homes – they are the ones the subsidized housing will help.


Please do not impose a further tax for BC residents and Canadians from other provinces who, like most of us, are simply trying to get by.







Helen Jones


Speculation Tax Update

The British Columbia government recently announced a “Speculation Tax” effective for the 2018 tax year. Details on the Speculation Tax have been limited especially given the magnitude and scope of the new tax. Below is some information released to date along with a link to the most recent Ministry of Finance Information Sheet:
So far the B.C. Government has advised the following:
Speculation Tax:

1.     The Speculation Tax will target foreign and domestic speculators in BC. 

2.     Exemptions will be available for:
a.     Principal residences (excluding satellite families – households with high worldwide income that pay little income tax in BC )
b.     Qualifying long-term rental properties (no specific definitions of long term rental provided)
c.      Certain special cases
3.      A non-refundable income tax credit will help offset the tax for BC residents. This will leave the bulk of the tax levied on vacant and short-term rental properties owned by individuals who do not live in BC, as well as satellite families.
4.     In 2018, the tax rate will be 0.5% of assessed value. In 2019, the rate will increase to 2% of assessed value.
5.     The Speculation Tax will initially apply to the Metro Vancouver, Fraser Valley, Capital and Nanaimo Regional Districts, and in the municipalities of Kelowna and West Kelowna.
At this time the following concerns and practice points have not been addressed:
1.    No grandfathering announced for existing owners or buyers currently under a contract of purchase and sale.   
2.  No announcement whether this tax can form a lien or is otherwise attached to the Speculator’s property (including after the Speculator’s property is sold in which case a Non-Speculator Buyer may be liable for a Speculator Seller’s tax liability).
3.  No announcement on how the Speculation Tax is to be prorated when a Speculator Seller has paid the tax for the year and the property is then sold to a Non-Speculator Buyer. 
4.  No announcement on any Seller or Government certificates that may protect a Buyer from tax liability when purchasing from a Speculator Seller or a Seller that the government may later deem to be a Speculator.
5.  No announcement on suggested changes to the Contract of Purchase and Sale that may be required to deal with liability to both buyers and sellers due to the proposed tax (including a Non-Speculator Buyer that may be liable for tax liability from a Seller that is later deemed to be
Many Realtors have commented that there appears to be a new landscape where government passes sweeping legislative changes often times on short notice, without grandfathering, without consultation with industry and with significant penalties (for example penalties of double the tax, interest on the tax, a fine up to $250,000 and up to two years in prison for Realtors providing certain advice or preparing certain documents under the Property Transfer Tax Act). Given this constantly changing landscape, we appreciate that you and your clients may wish to work with a law firm that is well-versed in these matters and Mullin DeMeo is proud to continue to assist you and your clients in this regard. If you have any questions on the above or any other real estate related matter, please do not hesitate to contact our office at any time.
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