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B.C. Speculation & Vacancy Tax—2019 Update

B.C. Speculation & Vacancy Tax—2019 Update

Certain B.C. property owners must act soon to claim a 2019 exemption from the province's SVT

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Registered owners of residential property in designated regions of B.C. must complete their online declaration by March 31, 2020, if they want to claim an exemption from the province's speculation and vacancy tax (SVT) for 2019. According to a B.C. news release, affected property owners should receive a letter with the required details for completing their declaration by February 21, 2020.

Property owners must complete the online declaration to claim their exemption from the SVT annually, regardless of whether any of their information has changed. Property owners who do not complete their declaration on time will receive a notice of assessment levying the SVT.

Affected owners who do not qualify for an exemption must pay their assessed SVT by July 2, 2020.

Tax rate and exemption changes for 2019

Tax increase for certain foreign homeowners

The SVT tax rate applicable to foreign owners and satellite families increases for 2019 (to 2% from 0.5% in 2018 of the assessed value of the taxpayer's interest in the property). The SVT rate remains at 0.5% for Canadian citizens or permanent residents of Canada who are not members of a satellite family.

Generally, a "satellite family" is one where an individual and their spouse earns worldwide income that is not reported for tax purposes in Canada in excess of the amount of reported income that is subject to tax in Canada. This may apply for example, where one spouse is not a resident of Canada, even if the other spouse owns and occupies the property, and files tax returns in Canada to report their worldwide income.

Residential rental property exemption

The SVT provides for a residential rental property exemption. To be eligible for this exemption in 2019 and subsequent years, qualifying rental property must be tenanted for at least six months in the calendar year (up from three months in 2018), among other strict conditions.

New and extended exemptions

The province also enacted changes to a number of exemptions in late December, 2019:

  • A one-year extension to the SVT exemption for vacant land (from 2018 to 2019)
  • A new SVT exemption for certain members of Canada's military and their spouses
  • A new SVT exemption for certain home owners whose property can only be accessed by water.

These last two exemptions are retroactive to when the rules were first introduced in 2018.

British Columbia has also extended the following two temporary SVT exemptions, which were set to expire after 2019:

  • The exemption for rental restricted "stratas" (e.g., condos) to December 31, 2021 (from December 31, 2019)
  • The exemption for "strata accommodation properties" (strata hotels) will now end December 31, 2021 (from December 31, 2019).

These changes may provide an additional two-year SVT exemption for affected taxpayers who own second properties in the province, such as condos. However, in the case of the rental restriction exemption, the exemption only applies if the property was acquired and the rental restriction was in place on or before October 16, 2018 (the date the draft SVT rules were first released).

Background

British Columbia introduced the SVT in its 2018 provincial budget. The tax is intended to target foreign and domestic property owners who do not pay income tax in British Columbia. The speculation tax applied at a rate of 0.5% of assessed value, starting in 2018 and then increased for certain property owners to 2% of assessed value in 2019. The tax applies to residential properties in certain areas of the province, and is subject to a number of exemptions, including British Columbian's primary residences and qualifying long-term rentals. For more information, contact your KPMG advisor.

Information is current to February 4, 2020. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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