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If you're a residential property owner in the urban centres of British Columbia, you might have received the speculation tax letter from the government. It's explicitly different from Vancouver's empty homes tax, however, in both cases, the homeowners are required to submit a declaration.
What Is British Columbia (BC) Speculation Tax
Everyone deserves a budget-friendly place to call home. However, rent and house prices are too high for many people. As an intervention measure, the provincial government addresses this crisis by annual speculation tax.
The BC speculation tax is the tax paid annually by some homeowners designated on the taxable regions of British Columbia. Some of these regions include Capital Regional District, City of Chilliwack, District of Lantzville, and Metro Vancouver Regional District. Within these regions, any treaty lands, self-government First Nations, or reserve lands are exempt.
But if your residential property is outside the popular areas, don't expect to get a declaration letter.
The speculation tax is meant to demoralize housing speculation. More so, it discourages people from leaving residential properties vacant in major urban centers in BC. All homeowners in taxable regions must complete the declaration form, even if they're exempted from the tax.
The tax contributes towards;
Supporting inexpensive housing initiatives
Turning empty residential properties into good, affordable housing for people who work and live in British Columbia
This tax is based on;
Where homeowners earn and report their income
How property owners use their homes
The residency status.
Speculation Tax Rates
The Speculation tax was introduced in 2018, where homeowners in taxable regions were required to pay 0.5% of the residential properties' assessed value.
As of 2019, the rate was reviewed based on where you pay income tax and your residency. Since then, the rates have been as follows:
0.5% for Canadians and British Columbians or permanent residents who don't belong to the satellite family
2% for satellite families and foreign owners.
If the residential property is co-owned, any owned tax shall be divided among the owners based on the ownership share. For instance, if you co-own a residential property equally, it means you'll both contribute 50% tax on the home's assessed value.
However, the rate for trustees, business partners, or corporations will be higher than for residential property.
The Exemptions of Speculation Tax
In 2018, the British Columbians were exempted from speculation tax if they lived in their properties or rented the homes for at least three months.
But from 2019, the terms were reviewed, where over 99% of BC would contribute to be exempted. If you have a home that's not a principal residence, it must be rented for not less than six months to get exempted.
You can be exempted from speculation tax even if your property is a principal residence. Exemptions for corporations and individuals are also available for situations such as divorce, extended absence, or hospitalization.
Some residential properties are exempted from speculation tax. The properties should be owned by:
Municipalities, governments, regional district, and other public bodies
Some not-for-profit organizations
An Indigenous nation
How to Declare BC Speculation Tax
If you're a residential property owner in major urban regions in British Columbia, you must complete the speculation tax declaration. This should be done by March 31 of each year. Ensure you declare each year even if there are no changes to your information.
If the property is co-owned, each owner needs to make a separate declaration, whether the other owner is a relative or spouse. There might be some special instances to consider, such as when the owner is out of town or deceased during declaration time.
You can declare your speculation tax over the phone or online. But the online declaration is considered easy, fast, and seamless.
For individual declaration, you'll need:
Your date of birth
Social insurance number
The speculation tax declaration letter
Service BC will verify your identity using your date of birth and SIN. Your personal information will be encrypted for maximum security and safety. The declaration letter will be sent to you via mailing address, latest February.
If you are not available to receive the declaration letter when it arrives, contact Service BC to help you submit the declaration on time. The letter contains:
A detailed list of residential properties you own in taxable regions
the Declaration Code, letter ID, and other necessary information needed for declaration.
Corporations, business partnerships, and trusts follow a similar declaration process as for individuals. However, you'll need to add a bit of information such as:
Your business number
The declaration letter
The corporation numbers
Date of incorporation number
The citizenship status, your name, date of birth, BC residency of tax, social insurance number, and business partnership or trust.
It's crucial to take note of important dates for the declaration of the speculation tax.
Opening of declaration period – January 20
Declaration due date- March 31
Notice tax mails – April-May
Tax payment due date – July 2
How Can BC Speculation Tax Be Avoided?
Speculation tax can be avoided in a number of ways. For example, if you buy a property on February 1 and resell it on September 30, the same year, for a profit, you'll not get subjected to speculation tax.
Properties that are accessible only by water or air and are not within taxable regions are not subjected to speculation tax. The speculation tax is not paid on residential properties rented out to tenants or lived in by owners.
Some members of the Canadian military get some limited exemptions. Strata properties are also subjected to a temporary exemption up to the end of 2012. this is if the property was acquired before October 16, 2018.
To claim your exemption, ensure you file the declaration every year. Your address and mail should be up to date. You're liable to pay speculation tax if you miss submitting the declaration in time.Wealthsimple Tax is a simple way to file your taxes. File your return with confidence it’s done right, and pay what you want—there’s no catch.
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