Despite the COVID-19 pandemic, the Canadian housing market has continued its hot streak. According to the Real Estate Board of Greater Vancouver, the Vancouver region saw a 53.1% increase in home sales in January 2021 when compared to January 2020. If you’re one of the many considering buying a home in the city make sure you keep in mind the application of the significant annual taxes that could add to homeownership costs in Vancouver and other urban areas within British Columbia.
Both the Province of British Columbia and the City of Vancouver have implemented a form of vacancy tax that can apply to homes in the city. The taxes are intended to disincentivize homeowners from owning homes that aren’t their principal residence or rented to an arm’s length party. If you own or plan to purchase a home in Vancouver or other urban areas in British Columbia and you will not live in the home for the majority of the year you should consider the potential impacts of the vacancy taxes to avoid a surprise tax bill.
B.C.’s Speculation and Vacancy Tax
The provincial speculation and vacancy tax (the “SVT”) applies annually at a rate of either 0.5% or 2% of the assessed valued of the property for the year depending on your citizenship status and where your income is earned. It affects properties located in Vancouver and other urban population centres around the province.
The SVT will apply to most residential properties that are not an owner’s principal residence. For the purposes of this tax, principal residence refers to a property that is lived in longer than any other property for the year. If the property isn’t a principal residence it may be exempt if it is rented for at least six months of the year, although the owners’ and tenants’ citizenship status and the jurisdiction where their income is earned (and taxed) may affect an owners ability to claim this exemption. Other exemptions also exist for houses under construction, new purchases, and other personal situations affecting owners.
Vancouver’s Empty Homes Tax
The city of Vancouver has also implemented an empty homes vacancy tax (the “EHT”) that may apply an annual tax at a rate of 3% of the assessed value for the year to certain properties located in the city.
The EHT will apply to properties that are not the principal residence of the occupier or rented to an arm’s length tenant for at least six months of the year. For the purposes of the EHT a principal residence is the place where the individual usually lives and conducts their daily affairs for at least six months of the year. It should also be noted that short term rentals, where the rental period is less than 30 consecutive days, will not count towards the six month time period required to meet the rental exemption.
Other exemptions may apply if the property is undergoing major renovations, is sold in the year, or the owner is affected by certain personal situations.
B.C.’s Additional School Tax
Residential properties located in Vancouver and throughout the Province will generally be subject to several other taxes based on the property’s assessed value for the year. These taxes include the General Purpose Tax Levy, the Provincial School Tax, TransLink tax, BC Assessment Authority tax, Greater Vancouver Regional District tax, and the Municipal Finance Authority tax.
However, in addition to these annual property taxes applicable province wide, there is an additional B.C. school tax on residential properties of 0.2% on value of property between three and four million dollars and of 0.4% on the value of property over four million dollars.
Therefore, any residential property owners in BC whose property is valued over $3 million in a year will pay the additional school tax annually, in additional to the other annual provincial property taxes.
Buying a Vancouver property and have questions? Get in Touch
When considering investing in a Vancouver property don’t overlook the application of these special vacancy and school taxes which can add a significant expense to annual home ownership.
Please don’t hesitate to contact me or any member of Boughton’s Tax Group if you have any questions as to how these taxes could apply to your situation.