BC Budget - New Real Estate Taxes & Measures
The 2018 BC budget included a suite of measures aimed at slowing the real estate market and attempting to increase residential rental stock. So many new measures added just after significant mortgage qualification rules came into effect January 1st 2018 make the chances of a declining Vancouver real estate market entirely probable. Here is a quick summary and commentary on some of the most significant measures:
- New tax aimed at homeowners who don’t pay income tax in BC and who leave homes vacant.
- The tax applies to the Metro Vancouver, Fraser Valley, Victoria (CRD), Nanaimo, Kelowna and West Kelowna.
- Tax rate of $5 per $1,000 of assessed value in 2018 and $20 per $1,000 of assessed value in 2019 and beyond.
- Province intends to vigorously enforce with data collection.
Foreign buyer tax
- As of February 21, 2018, the foreign buyer tax will increase to 20 per cent from 15 per cent. It will now also cover the Fraser Valley, Victoria (CRD) Nanaimo and Central Okanagan.
- Transitional rules apply if the property is located in the Capital Regional District, Fraser Valley Regional District, Regional District of Central Okanagan, or Nanaimo Regional District, and the property sale is registered February 21, 2018 or after.
Beneficial land ownership registryBeneficial ownership information will now be required on the Property Transfer Tax form.
Through the Land Titles office, benefical ownership information will be publicly available and shared with federal and provincial tax and law enforcement. In addition, BC corporations will be required to hold accurate and up to date information on beneficial ownership at their record offices.
This is a good start to curb not only money laundering and tax evasion in real estate but likely also in a myriad of other industries. It probably does not go far enough. In Europe, public shareholder registries are soon to become the norm.
Property Transfer Tax
Residential Property Transfer Tax for properties above $3 million will increase to five per cent from three per cent effective Feb. 21, 2018.
This increase is likely a good way to raise tax without angering the majority of the province but with the average price of a detached home on the Westside between $3.5-4m, a lot of people will be affected in those ridings. I would liked to have seen a more progressive version of say, 3% over $2m, 4% over $3m, 5% over $4m, 6% over $5m.
Provincial School Tax
Starting in 2019, school tax will increase on most residential properties worth more than $3 million.
This measure will also be significant for Westside Vancouver detached home owners. It will be interesting to see just how much more this will be.
Database on pre-sale condo assignments
Developers will now be required to collect and report information about the assignments of contracts for pre-sale condos. The province will share information with the Canada Revenue Agency (CRA).
This is in line with a significant increase in CRA enforcement of taxing gains on assignments. Most of these gains are considered income rather than capital gains so there is a lot of loot for both the provincial and federal governments here.
Online accommodation PST and MRDT
The province struck a deal with Airbnb to collect and remit the Provincial Sales Tax and Municipal and Regional District Tax (Hotel Room Tax).
This is a good idea and goes hand-in-hand with the City of Vancouver's new bylaw (effective April 2018) allowing residents to rent out their homes when away while still restricting the use of property exclusively for short term rental. Hopefully longer term (30days+) stays using the AirBnB platform will not be taxed as well. It would be great if the province could work with the CRA to clarify rules around short term rentals of a principal residence to ensure that owners don't get caught up in the mire of "deemed dispositions". A simple CRA maximum of perhaps 90 days on short term rentals of principal residences where, if not exceeded, are clearly defined as "incidental" to the primary use as a residence would be great.
Property tax treatment for ALR land
As part of the Agricultural Land Reserve (ALR) review, the province is examining residential land in the ALR to ensure land is used for farming.
Farmers hoping to cash in will not likely be glad for this focus but with only 5% of BC's land mass being good agricultural land and global warming, this seems like a "no-brainer".