Part of learning about a new property in British Columbia that you are interested in purchasing means learning about the costs associated with that property. For homeowners in the Vancouver and Surrey areas, that means learning the difference between Empty Home Tax and Speculation Tax. To help you navigate an area of property taxation that has confused plenty of residents already, we have prepared a short explanation of how each applies to BC housing tax codes.
Empty Home Tax vs Speculation Tax
The designation of these taxes has confused some people into thinking they are one and the same, just with a different name. To begin our explanation, we need to make it clear that the Empty Home Tax and the Speculation Tax are separate. One applies to each residential property owner in the province, and the other is applied only to those living in Greater Vancouver Area includes Surrey, Langley and Abbotsford. Knowing the difference between these BC housing taxes and how they apply to you is a vital aspect of home ownership in BC, and can have an impact on your search for homes in the area.
BC’s Speculation Tax
To begin, this tax usually doesn’t apply to most BC residents, but each property owner needs to declare their exempt status from this tax each year, otherwise they will have to pay up to 2% of the taxable value on the property. The Speculation Tax was introduced to increase access to urban markets in Vancouver where many Canadian citizens were being priced out due to unchecked foreign investments. These days, if a property owner earns more than 50% of their income outside of Canada, the Speculation Tax will apply to 2% of the previous year’s assessed value. In cases where property owners live and primarily earn income in Canada, the tax rate drops to 0.5%.
Whether the tax should or should not apply to you doesn’t matter to the province if you fail to declare your exemption from the tax. If you own a residential property in BC which happens to be your primary residence, you need to remember to opt out of the tax before the deadline!
Empty Home Tax
This tax is exclusive to Vancouver residential property owners and it applies under the municipal tax code rather than that of the province. Similar to the Speculation Tax, the Empty Home Tax is designed to slow the rate at which house prices were rising in the city. It is also meant to tax those who own residential properties in the city but who don’t pay income taxes in Canada, and encourage those owners to rent their properties rather than leave them vacant.
The Empty Home Tax won’t apply to those who’s primary residence is in Vancouver, or those owners who rent their property at least six months a year. Keep in mind that those to whom the tax doesn’t apply will still have to declare their property ownership status to be exempt. Those who end up paying the tax will be subject to paying 1% of the property’s taxable value.
Hopefully this has cleared up any confusion regarding the BC housing tax. For more information about property costs in the Greater Vancouver Area (Surrey and Langley area), during your house hunt, be sure to consult with a real estate expert from the Tony Z Team today!