Housing Speculation Tax Challenged in B.C.

written on behalf of Feigenbaum Law

We’ve regularly blogged about tax issues arising out of real estate transactions, including taxes being levied against foreign buyers in an increasing number of cities across Canada. We’ve also blogged about taxpayers fighting back against such levies. Now, a group of other taxpayers have launched a legal action against B.C’s Speculation and Vacancy Tax a move which appears to be the only major lawsuit to reach trial.

Speculation and Vacancy Tax (Provincial)

The B.C. government’s provincial Speculation and Vacancy Tax is part of the government’s so-called “30-Point Plan” intended to make housing more affordable across the province. It was introduced in late 2018.

This relatively new tax is not specifically aimed at foreign buyers, but rather, is intended to target foreign and domestic “speculators” who own property in B.C. but do not reside or pay taxes there. It is part of a broader response against investors who have been driving up real estate prices but leaving a high percentage of homes and condos empty. All owners of residential property in designated taxable regions must complete a declaration listing all residential properties they own in these designated taxable regions.

The government’s stated goal is to generate revenue and eventually turn empty homes into affordable housing. Earlier this year, the provincial government disclosed that the tax is expected to generate $115 million.

In addition to the speculation tax, there is also a separate tax specifically targeted at foreign buyers.

The Lawsuit

The lawsuit was filed in late September. The lead plaintiffs are a retired couple from a small town near Victoria: a 72-year old Canadian citizen and her 93-year old husband, a decorated U.S. war veteran.

The group of plaintiffs argue that the speculation tax unfairly targets individuals who split their time between two properties, a demographic which often includes retirees with limited income. The lead plaintiffs, for instance, spend part of each year in their British Columbian home, now worth $1.2 million, and the other half of the year in Texas where the husband receives medical care funded by Veterans Affairs.

The lead plaintiffs claim that they cannot afford to stay in their B.C. home due to the $6,000 annual speculation tax that has been assessed against them (in addition to the other property taxes).

The lead plaintiffs told CBC News that they’ve repeatedly declined offers from people seeking to purchase their British Columbia home. The couple only recently paid off the mortgage on that property so that the wife could permanently return to Canada following the husband’s eventual death. As a result of the new tax their plans are now in turmoil.

Grounds for the Legal Action

The lawsuit specifically claims that the tax is:

• unconstitutional;
• infringes on the Charter, and
• is beyond the scope of power of the provincial government.

The plaintiffs are seeking an injunction which would force the province to stop imposing the levy.

The lawsuit states:

Choosing where to establish one’s home is a quintessentially private decision that goes to the very heart of personal autonomy,” states the lawsuit. “The state should not be permitted to interfere in this private decision-making process … the act effectively coerces the petitioners to rent out their homes.

The B.C. government has not yet responded. We will continue to follow developments in this matter and will provide updates as they become available.

How Can Feigenbaum Law Help Homeowners?

If you need assistance with personal tax planning, including the implication of any real estate purchases, speak to Mark Feigenbaum. Our focus is Canadian and U.S. tax law, specifically the legal and financial complexities that arise when your money crosses the border. We offer a range of services in this highly niche area, providing skilled advice and solutions.

Our customized solutions streamline compliance requirements and set our clients up to take advantage of all possible current and future opportunities to reduce their tax burden. As a client, you will have peace of mind knowing that your matters are being handled by industry leaders with years of experience. We know taxes can be stressful, so we work with you to make your tax experience as simple and worry free as possible.

Referrals from Accountants, Lawyers and Financial Planners

At Feigenbaum Law our rare combination of U.S. and Canadian law and U.S. and Canadian accounting designations means we have the skills and knowledge to provide the nuanced advice necessary in exceptional matters. We have a reputation throughout the industry for our creative, custom solutions to complicated cross-border tax problems.

We are frequently referred complex files by accountants, lawyers and financial planners. We have the expertise to work with your clients on their cross-border tax issue while you continue to service their more general needs. We offer other professionals the opportunity to expand their own services beyond what a general firm can do to include our highly niche area. We routinely work on the thorny pieces of larger client portfolios in concert with other professionals.

Contact us to learn more about how we can help or call us at (416) 777-8433 or toll free at (877) 275-4792.