On November 27, 2018, the Speculation and Vacancy Tax Act received Royal assent and became law within British Columbia . Since this act did not negatively impact 99% of British Columbians, it’s easy to miss its overall impact and what it means for people both buying and selling in the Victoria area. If you are seeking to purchase a property within Victoria and don’t intend to rent it or reside in it, you’re going to want to know about this tax!
When Does This Tax Apply to Me?
The goal of this act is to reduce housing costs within BC. The law targets a few municipalities and regional districts, with the Capital Regional District being one of them (of which the greater Victoria area is a part). It is separate and different from the Vancouver foreign speculator housing tax, which had a lot of media coverage throughout the country. There’s a simple checklist to follow to determine if this tax applies to you.
- Are you living in your Victoria home and have made it your permanent residence? Great! You are exempt.
- Are you renting out your Victoria property or will you rent it out once you have bought it? Also good! You are exempt. Note, you have to rent it out at least six months out of the calendar year to be exempt.
If you don’t intend to live in your property and you don’t want to rent it out, then the tax probably applies to you. It’s worth noting that unlike the Vancouver tax, this applies regardless of your immigration status. Whether you are a Canadian citizen living in Calgary or a US citizen down in Seattle, you will pay this tax if you have a vacant vacation home in BC .
I Think This Might Apply to Me. How Much Do I Have to Pay?
In 2018, the assessed rate was 0.5% for everyone. For 2019 and beyond, the calculations vary. If you have a vacant home and are a BC resident, you will pay a 0.5% tax. If you are a Canadian citizen or permanent resident that lives in Canada, you will pay 0.5% in tax. If you fall into any other category, the tax rate clocks in at a whopping 2%. This amount is calculated based on the assessed value of the property. If your home is worth $500,000, you will have to pay $2,500 at the 0.5% rate or $10,000 at the 2% rate. Much like other taxes, you will have to keep paying this amount annually!
It’s worth noting that the 2% rate applies if the overall worldwide income is much higher than the Canadian-source income. This definition can lead to some peculiar determinations. There was a case of a Canadian woman married to an American man. They lived for much of the year in Texas and came back to BC periodically. He has a US military pension. Since most of their income comes from America, they are subject to the 2% rate !
For Better or For Worse, Vacation Homes Are More Expensive
Whether you live in the province, country, or reside elsewhere, buying a vacation home in Victoria became a much more expensive proposition with this bill. Since the government calculates these taxes based on assessed values, unfortunately as property prices continue to rise, so will the annual tax bills for people who have vacant homes. The tax generated $115 million in 2018-2019 alone and is projected to rise to $200 million in the future .
If you are looking at buying or selling your Victoria home and are not planning to rent it out or live in it as your permanent residence, speak with a real estate agent first. While they aren’t lawyers, your agent can walk you through this tax and help you understand if you will be subject to it or not. It’s essential to keep in mind when placing an offer! For more info on Victoria Speculation Tax see below.