{"id":12398,"date":"2019-05-04T10:10:47","date_gmt":"2019-05-04T17:10:47","guid":{"rendered":"http:\/\/www.roryc.ca\/blog\/?p=12398"},"modified":"2019-05-04T10:18:21","modified_gmt":"2019-05-04T17:18:21","slug":"how-the-speculation-vacancy-tax-is-catching-bc-residents-off-guard","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2019\/05\/how-the-speculation-vacancy-tax-is-catching-bc-residents-off-guard\/","title":{"rendered":"How The Speculation &#038; Vacancy Tax is Catching BC Residents Off Guard"},"content":{"rendered":"<p style=\"text-align: justify;\">The new BC speculation and vacancy tax \u2013 which for 2018 is based on a tax rate of 0.5% of a home\u2019s assessed value \u2013 was designed to target domestic and foreign speculators that own residences in BC but do not pay income tax in the province.<\/p>\n<p style=\"text-align: justify;\">The majority of BC residents who own only one home should be exempted. All owners of residential property in the designated taxable regions of BC must complete an annual declaration for an exemption or they will need to pay the tax. Some owners are being caught off guard by finding out they do not fit into one of the exemptions.<\/p>\n<p style=\"text-align: justify;\">\u201cIf someone had to pay the speculation tax for 2018, they really need to look to see if there are steps to be taken in order to get them into one of the available exemptions for 2019 \u2013 if not, whether the annual tax is something they can bear,\u201d says Manning Elliott LLP senior tax manager and chartered professional accountant Michael Ronse.<\/p>\n<p style=\"text-align: justify;\">If the person cannot abide by the tax, he or she will need to look at disposing of the property.<\/p>\n<p style=\"text-align: justify;\"><strong>Principal residence exemption issues<\/strong><\/p>\n<p style=\"text-align: justify;\">The two most common exemptions are the principal residence exemption and the tenancy exemption. Some of Ronse\u2019s clients have had confusion with the principal residence exemption, thinking that \u2013 as with income tax \u2013 they have the ability to choose one of their two homes as their principal residence.<\/p>\n<p style=\"text-align: justify;\">The speculation and vacancy tax principal residence exemption requires homeowners to claim the place where they reside for a longer period in a calendar year than any other place as their principal residence. Some people with a vacation home in BC and a home in the suburbs, who may also spend time down in the US during the summer, may end up spending more time in their vacation home, says Ronse.<\/p>\n<p style=\"text-align: justify;\">\u201cInstead of what they would ordinarily think of as their principal residence, being their more expensive home that is in a suburb of the Lower Mainland, they must claim their vacation home instead\u201d as their principal residence for speculation tax purposes, Ronse says.<\/p>\n<p style=\"text-align: justify;\">One of Ronse\u2019s clients lives in Vancouver, is a Canadian citizen and spends over six months a year living in his home in Vancouver. But his spouse, a US resident, works in the US and declares the majority of their income there, and does not file a Canadian tax return. The speculation tax doesn\u2019t allow foreign owners or members of a satellite family to claim a principal residence exemption.<\/p>\n<p style=\"text-align: justify;\">\u201cBecause our client\u2019s spouse earns more money than our client, for speculation tax purposes they are considered to be an untaxed worldwide earner, meaning they\u2019re considered to be a member of a satellite family,\u201d says Ronse.<\/p>\n<p style=\"text-align: justify;\">The client\u2019s spouse is looking at immigrating to Canada, getting citizenship and filing Canadian income tax returns so the spouse would not be treated as a member of a satellite family, hopefully fitting into a principal residence exemption for speculation tax purposes for 2019.<\/p>\n<p style=\"text-align: justify;\"><strong>Company structure issues<\/strong><\/p>\n<p style=\"text-align: justify;\">In a case in Vancouver, a corporation owned by a family trust owns residential property. Two brothers affiliated with the company are beneficiaries of the family trust, and one occupies the home as his principal residence. But, due to the ownership structure, they were hit by the speculation tax.<\/p>\n<p style=\"text-align: justify;\">One brother is a non-resident of Canada. The speculation tax looks through to the beneficiaries of the trust and to the corporate interest holders. If not all of the corporate interest holders of a corporation are Canadian residents, the person who lives in the home can\u2019t get a principal residence exemption, says Ronse.<\/p>\n<p style=\"text-align: justify;\">\u201cFor 2019, we have to look at that overall ownership structure and change the corporate interest holders if we\u2019re going to get the result that should have happened in 2018.\u201d<\/p>\n<p style=\"text-align: justify;\">Because the property is being occupied and used, from a policy perspective, this property shouldn\u2019t count as a speculation, says Ronse. He cautions companies to get tax advice if they have similar ownership concerns.<\/p>\n<p style=\"text-align: justify;\">\u201cTo me, what this really amounts to is a wealth tax,\u201d says Ronse. \u201cIt\u2019s not really a speculation tax because speculation to me is transactional in nature and the amount of speculation tax someone\u2019s going to pay is an annual tax. The longer a homeowner owns a home, the more speculation tax they\u2019re going to pay on that home if they don\u2019t have an exemption available.\u201d<\/p>\n<p style=\"text-align: justify;\"><a href=\"https:\/\/biv.com\/article\/2019\/04\/how-speculation-and-vacancy-tax-catching-bc-residents-guard\" target=\"_blank\" rel=\"noopener noreferrer\">How The Speculation &amp; Vacancy Tax is Catching BC Residents Off Guard<\/a> by Manning Elliott LLP | Business in Vancouver<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The new BC speculation and vacancy tax \u2013 which for 2018 is based on a tax rate of 0.5% of a home\u2019s assessed value \u2013 was designed to target domestic &hellip; [<a href=\"https:\/\/www.roryc.ca\/blog\/2019\/05\/how-the-speculation-vacancy-tax-is-catching-bc-residents-off-guard\/\">read more<\/a>]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[],"class_list":["post-12398","post","type-post","status-publish","format-standard","hentry","category-real-estate"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>How The Speculation &amp; 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