BC Government Moves Ahead with Speculation and Vacancy Tax

November 8, 2018 | Dwight D. Dee, Sharon MacMillan, Kathryn Gullason

On February 20, 2018, the BC Government announced its intention to implement a new tax on residential properties in certain regions of the province to address the housing affordability crisis. The “speculation tax” quickly became the water-cooler topic du jour, sparking widespread public debate.

The BC Government is now moving ahead with the new Speculation and Vacancy Tax (the “Tax”). On October 16, 2018, the BC Government introduced Bill 45, the Budget Measures Implementation (Speculation and Vacancy Tax) Act (“Bill 45”), which has received a first reading in the Legislature. If passed, the Tax will apply starting this year.

This article summarizes the provisions of Bill 45. However, through the legislative process, amendments to Bill 45 are expected, especially in light of the minority position of the BC government.

Who has to pay?

The Tax is an annual tax paid by owners of residential properties located in certain designated regions of the province. “Owner” is defined broadly under the new legislation to include: a registered owner in fee simple; a registered holder of the last registered agreement for sale; a life tenant under a registered life estate; and a person occupying residential property under a registered lease (and in whose name the property is assessed under the Assessment Act).

Unless an exemption applies, owners of residential property located in one of the following taxable regions are subject to the Tax:

  • municipalities within the Capital Regional District;
  • municipalities within the Metro Vancouver Regional District (excluding Bowen Island, the Village of Lions Bay and Electoral area A, but including UBC and the University Endowment Lands);
  • the City of Abbotsford;
  • the District of Mission;
  • the City of Chilliwack;
  • the City of Kelowna and the City of West Kelowna; and
  • the City of Nanaimo and the District of Lantzville.

Reserve lands, treaty lands and lands of self-governing Indigenous Nations are not included in the taxable regions. Islands that are accessible only by air or water are also not included in taxable regions.

Residential properties with an assessed value equal or less than $150,000 are excluded.

The Tax is distinct from the City of Vancouver’s Empty Homes Tax, and owners of residential property in the City of Vancouver could be subject to paying both taxes.

How much is the tax?

As set out in Bill 45:

  • For 2018: 0.5% of the property’s assessed value for all owners;
  • For 2019 onwards:
    • 0.5% for BC residents who are Canadian citizens or permanent residents (and not members of a satellite family).
    • 1% for Canadian citizens and permanent residents who are non-BC residents for income tax purposes (and not members of a satellite family); and
    • 2% for all other owners.

Within days after the introduction of Bill 45, the BC Minister of Finance Carole James announced that the government agreed with members of the BC Green Party to make several amendments to Bill 45 to secure Green Party support. The key amendment is the removal of the 1% rate.   If this amendment is made, the rate of 0.5%  would apply to all Canadian citizens and permanent residents who are not members of satellite families regardless of whether they are residents of BC or not.

A “satellite family” is an individual or an individual together with his/her spouse where a majority of their total worldwide income for the year is not reported on a Canadian income tax return.

The applicable tax rate for corporations, partnerships or trusts who own residential property will depend on the status of the entity’s shareholders, partners or beneficiaries.  For corporations, in order to qualify for the lower rates, all the “corporate interest holders” must satisfy the requirements for the lower rates. Generally, “corporate interest holders” are defined to be individuals who: (i) have legal or beneficial ownership or control, directly or indirectly of 25% of the voting rights or 25% or more of the value of the equity of the company; (ii) otherwise have the right to, directly or indirectly, appoint or remove from office the majority of directors; or (iii) has the right to exercise or does exercise significant influence or control over the corporation.  Generally, for partnerships, all partners would have to satisfy the requirements for the lower rates. Also generally, for trustees who hold residential properties, all of the beneficial owners in respect of the interest in the residential property would need to satisfy the requirements for the lower rates.


Every residential property owner in a designated taxable region must complete an annual declaration for the Tax by March 31st of each year. The BC Government will send a declaration letter in mid-February to taxable residential property owners which will describe how to complete the declaration and how to claim any relevant exemptions.

If an owner fails to file a declaration by March 31st, they can be charged a penalty of up to $100, plus an additional per diem penalty of $25 for each day the declaration is late (up to a maximum of $2,500). Further, starting in 2020, taxation authorities can impose a penalty of up to 10% on unpaid taxes. Parties who knowingly or negligently file or assist in filing an incorrect declaration are liable for penalties up to $100 plus 100% of any re-assessed taxes.


Bill 45 includes a long list of exemptions. Some key exemptions for individuals are as follows:

  • Principal Residence Exemption: An owner’s principal residence is generally exempt from the Tax. A principal residence is the place where an individual resides for a longer period in a calendar year than any other place. To be eligible for this exemption, an owner must be a Canadian citizen or permanent resident of Canada who is a BC resident for income tax purposes and is not part of a satellite family.
  • Rental Exemption: Homes that are occupied by tenants are exempt from the Tax. To qualify for the exemption, the home must be occupied at least six months of the year in increments of one month or longer (for 2018, the minimum is three months of the year).
  • Residential Care Facility Exemption: If an owner is away from their home because they reside in a residential care facility due to age, disability, addiction, illness or frailty, they are exempt from the Tax for up to two years.
  • Medical Absence Exemption: An owner who is away from their principal residence because of medical treatment for themselves, their spouse or minor child is exempt from the Tax for up to two years. The medical condition must be certified by a medical practitioner, and the treatment impractical to obtain close to the owner’s principal residence.
  • Death Exemption: If an owner dies in a taxation year, all owners of the property at the time of death and the deceased’s personal representative are exempt from the Tax for the year of death and the tax year immediately following.

Other exemptions for individuals include (among others):

  • Exemptions for hazardous or damaged property;
  • Year of acquisition exemption;
  • Spousal separation exemption;
  • Bankruptcy exemption;
  • Exemption for testamentary trust for minor;
  • Exemption for properties with rental restrictions;
  • Exemption for strata accommodation unit;
  • Licensed daycare exemption; and
  • Vacant land exemption.

Many of the exemptions available to individuals are also available to eligible corporations, trustees or partners that own residential properties. Generally, corporations, trustees or partners can claim exemptions in a similar manner provided that their corporate interest holders, beneficial owners or partnership interest holders meet the same requirements that individual owners have to meet.

Owners of property that are under construction or substantial renovation are exempt if reasonable steps are being taken without undue delay to develop or renovate the property. Exemptions for land under development include:

  • Unoccupiable residence exemption: Owners are exempt if the residence cannot be occupied for 90 days in the calendar year due to construction or renovation or if there is not yet a residence on the property.
  • Conservation of heritage property exemption: Owners of a heritage property are exempt if the residence is unoccupied for 90 days in the calendar year due to renovations to conserve the heritage property.
  • Phased residential developments: Owners are exempt where specific multi-unit residential developments are being built in phases on two or more residential properties. The exemption is not available if the residence was occupiable for a period of 180 days in the year.
  • Vacant new inventory: Owners are exempt where the owner is the developer of five or more residences and at least one newly-built or newly-placed residence in the development:
    • has been offered for sale to the public this year,
    • but has not yet been occupied as a home.

No Tax will be levied for the 2018 tax year for land that has no residential property on it.

Certain specified owners of residential property are also exempt, including (among others):

  • an Indigenous Nation;
  • municipalities, regional districts, governments and other public bodies;
  • registered charities;
  • housing co-ops; and
  • certain not-for-profit organizations.

Tax Credits

Owners who are not eligible for an exemption may be eligible for a tax credit that would reduce or eliminate the tax.

BC residents are eligible for a tax credit of up to $2,000. This effectively exempts homes assessed at $400,000 or less. The credit is only available for one property per year and cannot be carried forward or transferred to a spouse.

In Bill 45, non-B.C. resident Canadians are eligible for tax credits to the extent that they pay B.C. income taxes. However, as proposed in Bill 45, the tax credit cannot reduce the tax rate below the tax rate paid by B.C. residents.  As mentioned above, the government has agreed to make a change to Bill 45 such that all Canadian citizens or permanent residents not part of satellite families would be subject to the same rate as B.C. residents (0.5%).   With this proposed amendment, it is not clear yet how tax credits will apply to Canadian citizens or permanent residents who are not part of satellite families.

Foreign owners and other owners of residential property that must pay the 2% rate can claim a tax credit equal to 20% of their B.C. income to reduce the tax owing.  However, the tax credit cannot reduce the tax rate below the 0.5% payable by B.C. residents.


According to the BC Government, the Tax is designed to prevent housing speculation and help turn vacant and underutilized properties into homes for people who live and work in BC. The Tax is part of the government’s 30-Point Plan to address the housing crisis.  In recent months, the housing market, especially in Metro Vancouver has begun to cool, particularly for single family detached homes.  It will be interesting to observe whether the Tax truly has an impact on home prices and affordability, especially in condominium and townhouse markets where prices have remained relatively elevated.


This publication is provided as an information service and may include items reported from other sources. We do not warrant its accuracy. This information is not meant as legal opinion or advice.

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