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If you’re a real estate investor in Sooke, you’re probably aware of the speculation tax. It is part of British Columbia’s Speculation and Vacancy Tax Act, which received royal assent in 2018. This tax applies to designated areas of British Columbia and isn’t applicable to all rental properties. It’s really only a concern if you own property in one of the relevant areas, and if your property is vacant.
Whether you’re a new investor or an experienced investor who is considering additional property acquisitions, we believe it’s important that you know about this tax and consider the legal implications before you buy in an area that’s bound to the law. It’s a good idea to speak to your tax accountant about how this affects you personally and your investment portfolio.
Areas Where this Tax Applies
The Speculation Tax is only applicable when you own a rental property in one of the following areas of British Columbia:
- Metro Vancouver (but not the University Endowment Lands and Lions Bay areas)
- Capital regional district (but not Gulf Islands and the Strait of Juan de Fuca)
- Kelowna
- West Kelowna
- Nanaimo-Lantzville
- Abbotsford
- Chilliwack
- Mission
If your asset isn’t in one of those areas, you don’t have to worry about paying the speculation tax. You do, however, still need to complete a declaration letter if one is sent to you, even if your property is not located in one of the areas above. If you are unsure if your property falls within one of the designated tax regions, contact the Speculation Tax office at 1-833-554-2323, or spectax@gov.ba.ca.
Cost and Reporting Requirements
The amount of tax is calculated from your property’s current assessed value. The speculation and vacancy tax rate varies, depending on the owner’s tax residency. In addition, the tax rate varies based on whether the owner is a Canadian citizen or permanent resident of Canada, or a satellite family. A satellite family is defined as “people who declare less than 5% of their total combined household income for the year on Canadian income tax returns.” The tax rate for 2018 was 0.5% of the properties assessed value; for 2019 and subsequent years, the tax rate is 0.5% for Canadian citizens or permanent residents of Canada who are not a member of a satellite family.
Property owners will need to complete and submit an annual declaration if they want to be exempt from the speculation tax. Make sure you submit the required documentation for all of your rental properties before March 31 of any given year; otherwise, you will face a two percent tax on every property you own, even if it was not vacant in that year. It’s critical you follow the reporting requirements.
Exemptions from the Speculation Tax
If your rental property remains occupied for at least six months out of the year, you won’t have to worry about paying the speculation tax. This is only applicable to properties that are vacant and seem intent on remaining vacant. You can also be exempt if the property is your principal residence, if the home is hazardous and uninhabitable or if you’re making renovations to the property.
Most of the landlords and property owners we work with are renting out their properties long-term to tenants who stay in place and keep them from having to pay this tax.
However, the law is always changing. If you’re looking for help with your Sooke rental property, please do not hesitate to contact us at Greenaway Realty. We are here to help, and we work with professional partners like accountants and attorneys all the time.