We have all heard of the saying attributed to Benjamin Franklin, “…in this world nothing can be said to
be certain, except death and taxes.” These words can not be truer about the state of taxation of real
property in B.C. In 2018, both provincial and municipal governments took steps which changed the face
of B.C. real property taxation in an effort to increase the availability of affordable housing for local
residents. If you are considering buying land in B.C., these tax changes may significantly impact your
decision. It will be very important to obtain sound advice regarding the real property taxes before you
sign on the dotted line.
BC Property Transfer Tax – When registered ownership of property is sold or transferred, the transfer of
the property must be registered in the land title office. At the same, property transfer tax is paid to the
Minister of Finance by the buyer of the property. Property transfer tax applies to property where ever
located in the province and is generally payable whenever there is a registrable change in ownership of
real property. The rate of tax is 1% of the first $200,000 of property value, 2% of property value
between $200,000 and $2,000,000. In 2018, the tax rate was increased from 3% to 5% for property
value over $3,000,000.
Foreign Buyer’s Tax – Foreign entities (which includes foreign nationals and foreign corporations) must
pay a foreign buyer’s tax in addition to property transfer tax. When this tax was first introduced, the
application of the tax was geographically limited to the Metro Vancouver Regional District; but, in 2018,
the areas being taxes expanded to the Capital Regional District, the Regional District of Central
Okanagan, the Fraser Valley Regional District and the Regional District of Nanaimo. Also, in 2018, the
rate of tax was increased by 5% to 20% of the property value. The tax paid by a foreign entity will be
proportionate to its interest in residential property.
Speculation and Vacancy Tax – Subject to specific exemptions, speculation and vacancy tax is paid
owners of property located in the Metro Vancouver Regional District (subject to certain area exclusions),
the Capital Regional District (subject to certain area exclusions), Kelowna, West Kelowna, Abbotsford,
Chilliwack, Mission and Nanaimo-Lantzville. This tax applies as of January 1, 2018. For Canadian
residents and permanent citizen, the tax rate is 0.5% of the property’s assessed value; as of January 1,
2019, for “untaxed worldwide earners” (persons who report less than 50% of their worldwide income
combined with the income of their spouse in Canada), the tax rate is 2%.
The two primary exemptions for the speculation and vacancy tax are the principal residence exemption
and the tenanted property exemption. For the principal residence exemption, as of December 31, the
property must be owned by an adult resident of B.C. who occupied the property in the calendar year for
a period of time longer than anywhere else. For the tenanted property exemption, the property must
be rented for at least three months in 2018 and, for 2019 onward, six months; the rental periods much
not be less than 30 days. If you own property in Kelowna which is not your principal residence, the
tenanted property exemption may apply if 1) you rent to an arms-length tenant, enter into a written
rental agreement and your tenant makes the property their home; 2) you are not an untaxed worldwide
earner, you rent to a non-arm’s-length tenant who has the right to occupy the property and the tenant
lived in the property longer than anywhere else during the month; or 3) you are an untaxed worldwide
earner, you rent to a non-arm’s length tenant and the tenant has a certain level of income subject to BC
Vancouver Vacant Home Tax – Owners of property in Vancouver must pay vacant home tax if the
property is “unoccupied property”. This empty homes’ tax was introduced in 2018. The tax rate is 1% of
the assessed value of the property. This tax does not apply to a principal residence. A rental property
that is rented for at least 30 days in a row and is not unoccupied for more than 180 days in a year may
be exempted from the tax.
The details of the taxes described above are set out in a very general way. There may be additional
requirements to qualify for an exemption that are not fully set out as well as other exemptions which
apply to a particular situation beyond those described in this column. In addition, when considering
estate planning or business transactions, it will be important to keep the impact of these taxes in mind.
See your professional advisor for additional information.