Written on behalf of Feigenbaum Consulting
We’ve previously blogged about the B.C. government’s introduction of the Foreign Buyer’s Tax, which came into effect 2016 and requires all foreign entities (including foreign nationals) to pay an additional 20% on the purchase of residential property in the Greater Vancouver area.
The purpose of the tax was to cut down on the number of foreign buyers who were purchasing homes in the region, but not living in them, leaving many homes and condos vacant and vastly inflating the price of real estate.
Now, news sources in the province are reporting that enterprising individuals are using creative loopholes as a means of helping foreign buyers circumvent the Foreign Buyer’s Tax. These individuals have been advertising their “services” on Craigslist, angering many in Vancouver, who have long seen and felt the impact of speculative property purchasing.
Cracking Down on Foreign Speculation
Before we get into exactly what has been happening, it is worth delving into the measures that both the provincial and city governments in B.C. have taken in recent years to address the issue of homes being bought simply as investments by speculative foreign buyers.
In addition to the Foreign Buyers Tax, these measures include:
Speculation and Vacancy Tax (Provincial)
This new tax is intended to target foreign and domestic speculators who own property in B.C. but do not reside or pay taxes there.
All owners of residential property in designated taxable regions must complete a declaration listing all residential properties they own in these designated taxable regions:
- Municipalities within the Capital Regional District (excluding Salt Spring Island, Juan de Fuca Electoral Area, and the Southern Gulf Islands);
- Municipalities within the Metro Vancouver Regional District (excluding Bowen Island, the Village of Lions Bay and Electoral Area A, but including UBC and the University Endowment Lands);
- The City of Abbotsford
- The District of Mission
- The City of Chilliwack
- The City of Kelowna
- The City of West Kelowna
- The City of Nanaimo
- The District of Lantzville
99% of British Columbians are anticipated to be exempt from the tax.
Empty Homes Tax (Vancouver)
Owners of residential property in Vancouver are required to submit a property status declaration. Properties deemed to be empty are subject to a tax of 1% of the property’s assessed taxable value fromt the previous year.
This is in addition to any provincial Speculation and Vacancy Tax that may be assessed.
Information That Must be Provided
Prospective purchasers buying a residential or commercial through a corporation or a trust must provide the following information when filing a property transfer tax return:
- Name of the buyer;
- Their date of birth;
- Citizenship details;
- Contact information; and
- Tax identification numbers (business number, social insurance number, etc.)
What Exactly is Happening?
An ad which appeared on Craigslist over the weekend, but which has since been removed, read “avoid the foreign home buyers tax, we can help you”. The people listed on the ad were a couple identified only as “J and S” who were offering house-sitting services in Vancouver and surrounding areas. The idea seems to be that foreign buyers can hire the couple to live in their home so that the property is not vacant and the tax does not apply.
The couple claims that they have house sat for numerous properties in Dunbar, West Vancouver, North Vancouver, and Whistler.
Unsurprisingly, the ad and the services it purports to provide has been met with widespread disappointment and anger. Global News spoke with several residents in neighbourhoods where the couple claims to provide their services. The residents mentioned that this arrangement the couple is offering is a “betrayal” and that they have seen first-hand the impact that homes which have been sitting empty have had on the neighbourhood.
Response from the Government
Carole James, B.C.’s Finance Minister called the practice outlined in the ad illegal and a violation of various pieces of tax legislation:
If there are people who want to defraud a system they’ll try and find ways to do that. But we have clear anti-avoidance laws in place… We’re very concerned about any kind of scheme people may be putting together and we’ll certainly be looking into it.
The City of Vancouver has noted that house-sitters are permitted, but they must live in the property they are taking care of for at least 30 days at a time and must also establish that the address is their primary residence. City staff also monitor records to ensure that names of renters and house-sitters are not listed on multiple properties.
We will continue to monitor developments in this matter and will provide updates as they become available. In the meantime, if you need assistance with personal tax planning, speak to Mark Feigenbaum.
We offer customized solutions for each of our clients that streamline compliance requirements and set them up to take advantage of all possible current and future opportunities to reduce their tax burden.