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This article is the second of a two-part series which discusses common implications and considerations post-purchase of a property in British Columbia, specifically, Vancouver.
Please refer to part one for a discussion on pre-purchase considerations.
The SVT is a provincial tax automatically imposed by the government of B.C. for all residential properties in many B.C. regions. The purpose of the SVT is to discourage housing speculation in order to turn vacant homes into housing for B.C. residents. The tax is based on property ownership as of December 31st each year.
An annual declaration is required by all registered owners of a residential property. This means that if one property has two registered owners, both owners are required to complete a separate declaration. Owners should receive a declaration letter as a reminder, which includes a letter ID and declaration code. The declaration is completed online and confirms the residency status and property usage in order to determine whether the property is exempt from the SVT. The declaration is due March 31st annually.
Most properties will be exempt from the SVT. The most common exemptions are if the property:
For a full list of exemptions, please click here.
If none of the exemptions apply, the property will be subject to a SVT of a percentage of the property’s assessed value as per B.C. Assessment as of July 1st of the applicable year. The rates are as follows:
When there are multiple owners, the SVT will be allocated based on ownership. For example, if Person A and Person B have equal ownership in the property, they each will owe tax on 50% of the assessed value. Amounts owing are due on the first business day in July.
The EHT is a municipal tax imposed by the City of Vancouver on residential properties in Vancouver classified as Class 1 properties. The EHT and SVT both have the same goals of addressing the current rental housing market crisis.
An annual declaration is required for each property. Unlike the SVT, only one property status declaration is required per property. The declaration is completed online and confirms the property status in order to determine whether the property is subject to the EHT. The deadline for declaration is in February.
Most properties will not be subject to the EHT. The most common exemptions are if the property:
For a full list of exemptions, please click here. Note that a declaration is required even if the property is exempt.
The EHT is calculated as 1.25% of the property’s assessed taxable value in the previous tax year. The deadline for payment is in April.
Property taxes are an annual tax charged by each municipality. The purpose of property taxes are to help fund both municipal and provincial public services (e.g. police stations, fire departments, public parks, public schools, public transit, etc.). Each municipality may have varying rates; however, our focus will be in the City of Vancouver.
The City of Vancouver sends two tax notices annually – the first being an estimate based on actual taxes paid in the prior year:
For the City of Vancouver, the rate is 2.92% of the property’s assessed value. See this link for a breakdown of the rate. Beginning in 2020, for certain properties valued at $3M or greater, there is an additional school tax rate of 0.2% for any portion of the property’s assessed value in excess of $3M and 0.4% for any portion in excess of $4M.
Property owners can claim a home owner grant to reduce the total property taxes payable if they meet certain eligibility criteria. This grant must be claimed annually.
In many cases, properties are purchased with the intention of renting out. In this situation, one potential post-purchase implication to consider is capital gains upon sale of the property. A capital gain occurs when you sell the property for more than the total of its adjusted cost base (cost plus acquisition costs such as legal and commission fees, less any depreciation taken) and any related selling costs (e.g. legal, transfer taxes, advertising, certain repairs, commissions, etc.). For a property in B.C., 50% of the total gain is taxable.
In a case where the property is designated as a principle residence for some or all of the years owned, a principal residence exemption may apply and reduce the overall capital gain. You can only designate one property as your principle residence per year. Furthermore, it should be noted that a taxpayer and their spouse/common-law partner can only designate one principal residence between the two (during and after 1982). For example, if a husband and wife own both a house and a cottage, they collectively can only designate either the house or the cottage as their principle residence in a given year.
There are four conditions that need to be met to qualify to be designated as a principle residence:
The calculation for the principal residence exemptions is:
(# of years home is principal residence + 1) x capital gain
# of years home is owned
The +1 is meant to account for a year when a property is sold/purchased.
For illustration purposes, here is an example of some ongoing taxes that a property owner in Vancouver, B.C. may incur:
You are a foreign national working temporarily in Vancouver and purchased a newly constructed home in Vancouver on January 1, 2020 at a selling price of $4.2M for the purposes of holding and selling for a profit. You still do not have plans to immigrate to Canada and are still holding the home with no plans to rent out the home. The property’s assessed value as of July 1, 2021 as per BC Assessment was $3,780,000. It is now December 31, 2021 and you are starting to think about all the upcoming filings and payments you are responsible for.
In summary, the total payments considering all applicable taxes for the 2021 calendar year is $234,786 and the important dates to note are as follows:
In addition to the costs discussed above, other common considerations are rental tax implications such as income tax on rental income, and GST on short-term rentals. For any questions or to discuss any planning opportunities that may be available, please contact your Smythe advisor.
 Individual who is not a Canadian citizen or Canadian permanent resident
 Individual whose income not taxed in Canada is greater than their income taxed in Canada. If married, the combined income of both spouses is considered
 Includes detached homes, stratified condominiums or townhouse units, residential class vacant land. Excludes apartment buildings.