A letter from Texas regarding the so-called Speculation and Vacancy Tax. I'm ashamed of my provincial and muncipal governments. We all should be.

I received the following note from one of the many people who love BC and have kept second homes here. However, thanks to brainchild of some university academics determined to find a way to tax Chinese satellite households who don't pay income tax in BC, and the NDP government, many will be forced to sell and give up a home in BC, or rent a second home. 

I know for a fact that this is something many are contemplating. Ironically, this will further reduce the availability of rental housing. I can't help but wonder if the provincial government and City of Vancouver even thought of this. Somehow, I doubt it.

Hi Michael,

Thank you for taking my call today.  As I mentioned, my primary residence is Texas.  However, I spend summers - usually May - Oct on Vancouver Island.  As I understand the Speculation Tax, I can only claim an exemption if it is my primary residence AND I am a Canadian citizen or permanent resident of BC for income tax purposes.  Please see the info below from the gov.bc.ca/spectax website.

Perhaps some of the confusion is that as also stated on this site, the speculation and vacancy tax is distinct from the empty homes tax in the City of Vancouver (see below).  Even if the requirement to live on the property were reduced to 3-4 mos, this would not be helpful for foreign investors outside of Vancouver, like myself who are not Canadian citizens or permanent residents. 

It is unheard of to introduce a new law - and put it into effect retroactively, so that individuals don't have time to make adjustments to comply. It seems that this speculation tax is a money grab and not truly designed to address the housing shortage. We and others are actively contributing to the economy of the community by patronizing local stores, restaurants, attending and even volunteering at community events.  We are not being supported by Province or community services.  At a minimum, it would seem that we should be "grandfathered", since this was not an issue when we made our decision to purchase our properties.  

The government website states: 

Speculation and Vacancy Tax The speculation and vacancy tax, also known as

By levying the highest tax rate on foreign owners and satellite families (those who earn a majority of income outside the province and pay little to no income tax in B.C.), the speculation and vacancy tax is a way to make sure these property owners are paying their fair share in taxes.  

What this doesn't take into consideration is that we pay GST and PST on goods and services in addition to our property taxes.  Individuals such as myself who are retired are no longer producing income, so how is this a fair tax?!

One of the reasons given for the tax was that investors are buying properties and keeping them vacant.  However, that is not the case for many who are being affected by this tax.  We are using them as Second Homes, a scenario which is not provided for in the Speculation Tax Exclusions, but is discussed under the Vancouver Empty Home Exclusions.  

My property and those in our subdivision are not properties that would help with the first-time buyer, senior, student or "working family" market, which is another reason given for the rule that we must rent it if we are not using it for more than 6 months.  However, the rent that we would charge would not be affordable to this population.  Additionally, those of us from outside of Canada are not able to remain for longer than 6 months or even eligible to apply for permanent residency due to immigration laws, so it is a "catch-22".

So, even with living in BC for 6 mos (the maximum time allowed a US Citizen), there is still a clause that says we must rent it for 6 mos to get the exclusion.  

Michael, I appreciate the work you are doing to address this mean tax and hold the government accountable.  I love my life in BC and I take great joy in participating in community events and making new friends and hiking in the Provincial parks and patronizing my new community.  However, this decision by the government has somewhat soured my feelings about the decision that I made to invest in the Canadian economy.  There is no downside to people like me owning real estate in BC and it seems that this is a broad sweeping tax aimed at solving a specific problem (Chinese in Vancouver taking advantage of provincial services and not paying taxes).  For the majority of the folks who will be adversely affected by this tax, this is not the case.

You can get to the links below by right clicking to Open in a New Tab. 

From the gov.bc.ca/spectax website:

The Empty Homes Tax:

Note: The speculation and vacancy tax is distinct from the empty homes tax in the City of Vancouver.

Most properties will not be subject to the Empty Homes Tax, including those:

• Used as a principal residence by the owner, his/her family member or friend, or other permitted occupier for at least six months of the 2018 tax year
• Rented for residential purposes for at least six months of the current year, in periods of 30 or more consecutive days
• Meeting the criteria for one of the exemptions 

Individuals Exemptions for Speculation and Vacancy Tax

Exemptions

The following exemptions are available for individuals:

1. Principal residence exemptions
2. Occupied by a tenant
3. Can’t live in the residence because it’s uninhabitable
4. Secondary residence close to medical treatment facility
5. Just bought or inherited the property
6. Separation or divorce
7. Bankruptcy
8. Recent death of owner
9. Property is in a trust created by a will for a minor
10. Property has rental restrictions
11. Property is a strata hotel
12. Property includes a licenced child daycare
13. No residence on the property
14. Other exclusions from the tax

1. Principal residence exemptions

Generally, an owner is exempt from the tax if the residential property is their principal residence, which is the place where the owner lives for a longer period in a calendar year than any other place. People who have multiple homes can only claim the principal residence exemption on the home they live in for the longest period in the calendar year.

Spouses cannot claim two different principal residence exemptions unless specific situations apply, such as spouses living apart for work or medical reasons or because of separation or divorce.

To be eligible for a principal residence-related exemption, an owner must be a Canadian citizen or permanent resident of Canada who’s a B.C. resident for income tax purposes and isn’t part of a satellite family.

Let's continue to share what we learn.  I will appreciate any assistance that you might provide.