Speculation Tax Notice 2023

Feb 17, 2023

Speculation Tax

Speculation Tax Notice 2023

An envelope is coming to your mailbox soon and it is in the name of the Speculation Tax Notice. There is also a potential you are reading this blog with the notice in your hand, already reviewed. What is a Speculation Tax Notice though? That is what we are here to answer.

What is a Speculation Tax Notice?

The Speculation Tax Notice, introduced in 2018 by former premier John Horgan’s NDP government, applies in communities where housing is in high demand. In January, the tax was expanded to more communities that were experiencing housing shortages. 

The Speculation Tax was created to help fill empty homes and bring down the value of the real estate market to help future homeowners. The Speculative Tax looks into different circumstances, such as whether you are currently living there, whether you make most of your income domestically or internationally, if it is your secondary residence, whether it is an investment property, whether you have short or long term tenants, etc.

All citizens who receive the Speculation Tax Notice must fill it out to show the government what you are currently doing with that property that is within the regions chosen. It is also important to note that if a property has more than one owner, a separate declaration must be made for each owner, even if the other owner is your spouse or relative. It helps keep track to make sure the interest of the home is within the means of the Speculation Tax.

Who is getting the Speculation Tax Notice?

Throughout the province, many homeowners will be receiving the Speculation Tax Notice in the near future. These areas include the Lower Mainland, eastern Fraser Valley, Kelowna and southern Vancouver Island.

For the areas added this year due to experiencing housing shortages, those areas include North Cowichan, Duncan, Ladysmith, Lake Cowichan, Lions Bay and Squamish. It is important to note that these areas will not need to be declared until the 2024 tax year. 

What does the Speculation Tax Notice ask for?

Once you receive your Speculation Tax Notice, it will ask you for a certain amount of information.

For one, it will ask for you SIN number so that the government can confirm your residency, assist in identifying if you pay income taxes in Canada, verify if you are eligible to receive the principal residence exemption or other exemptions, determine what tax rate will apply (if you have to pay tax, and determine which tax credit you may be eligible for.

The Speculation Tax Notice will also ask whether you pay taxes in Canada and how you use your property. 

What is the rate of the Speculation Tax?

The rate for the Speculation Tax is 0.5% of the home’s assessed value for permanent residents of British Columbia and 2% for foreign owners or members of someone who earns most of their reportable income outside of Canada, which is called a “satellite family.”

Are there any Exemptions to the Speculation Tax?

Yes, there are some exceptions. Well actually, 99% of people in British Columbia are exempt from the speculation vacancy tax.

Anyone who uses a home as a primary residence or rents it out to long-term tenants does not have to pay the tax. Other exemptions for individuals and corporations are also available for circumstances such as major home renovations and life events such as divorce, hospitalization, or extended absence. To learn more about these exemptions and what they mean for different entities, such as corporations, trustees, business partners and individuals, check out this site.

Conclusion

Speculation Tax Notices are on the way and it is important to understand how it will affect you. For most, you will just need to fill out the information that it asks. For a select few it could raise your tax owed in this upcoming tax year, but remember all new areas that were released in January (North Cowichan, Duncan, Ladysmith, Lake Cowichan, Lions Bay and Squamish) will not have to pay the tax until the 2024 tax year.

As always, please reach out to us if you have any more questions.

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