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Additional Speculation Tax Info

I received an interesting question after I sent you the last email about the Speculation Tax. The answer is important and not what I expected.

I was asked how the tax would be applied to multiple owners of a property, and if an owner was not a resident of Canada with a Social Insurance Number.

Since I didn’t know the correct answer I called Service BC who is handling all the calls related to the Speculation tax.

Service BC does not know how the tax will be billed or collected, nor do they know if a delinquent account will be personal to the owner (as a person or company) or to the property. If it were the latter it would be a lien.

The scenario I outlined was four separate owners of a property, one of which is offshore and has a 10% interest. I was told that the Speculation Tax, if applicable, would be apportioned to that one person at 10% of the maximum Speculation Tax rate. The 10% being their proportionate share of interest in the title.

Assuming that the other three used the property as their primary residence, they would be exempt from the tax.

Therefore, it appears to me that the tax is ‘attached’ – if you will – to the owner and not the property. This is why each owner of the property must complete the declaration and also provide their SIN.  That doesn’t preclude the government placing a lien on the property for unpaid tax, if that is their direction. However, it does mean that even if one of the owners does not have the property as their principle residence, then there could be application of the Speculation tax.

I was also told the government will now also provide an exemption in the year a person buy a property, and would otherwise have to pay the tax.  For example, if I buy a vacation condo in Kelowna in 2019 for my family to use; I would be exempt from the Speculation tax in 2019, but I may not be exempt in 2020 if it was not my principal residence or occupied full time in 2020.

Apparently, there is also an exemption to properties in the taxable regions if the property value is below $150,000. While no one said this, I suspect this is intended to capture some modular homes, low income residential properties, RV lots, etc. This is good to know if you specialize in these types of properties.

Here is another little known tidbit of information. I was told that notwithstanding the declaration EVERYONE will be charged the tax and you must claim a tax credit to offset the tax, so it would not impact you.

That’s right, you and your clients can’t simply depend on the declaration in order to avoid the tax.

This is a two-step process. Declare by March 31, and then claim the tax credit. The person I was speaking with didn’t know what would happen if the person who declared they were exempt on the declaration forgot to claim the tax credit.  This is because the actual billing process for the Speculation tax hasn’t been worked out, according to the person I spoke with.

Here is a final piece of advice from Service BC. If you, or your clients, wish to reach them, the best time to call is on the weekend when call volumes are lower. They are open 7 days a week. When I called on a Sunday afternoon my wait time to speak with an agent was less than a minute. When I tried on a weekday, the wait time was over 30 minutes.

I am not an expert on this new tax, by any means. Therefore, you should take the time to look into it for yourself and your clients.

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