There have been so many announcements and shifts in laws surrounding tax and property this year, that we thought it would be helpful to mute the chatter and distill it down to what you really need to know. As always we welcome your calls and questions surrounding these items and have excellent resources for you as well if you are trying to navigate through some that are impacting you directly.
Below are outlines of 7 major changes coming into effect 2022-23:
- Foreign Buyer Ban
- Cool Off Rescission Period
- Anti Flipping Tax
- Abolition of Strata Bylaws that Prohibit Rentals or Certain Age Restrictions
- Areas Added to BC Speculation & Vacancy Tax
- Changes to the City of Vancouver Empty Home Tax
- Transparency Requirements for Companies Holding Property in BC
1. Canada Foreign Buyer Ban – Bill C-19
Per the April 2022 Budget, this law goes into effect Jan 1, 2023, and prohibits any Non-Canadian citizen or entity from purchasing property in Canada for 2 years (until the bill is repealed). This also places an onus on Sellers, as there is a $10,000 penalty should a Seller transfer their property to a Non-Canadian during this period. There is heavy speculation that there will be some areas exempt from this law, though such declarations have not formally been made as of yet.
2. Mandatory Cool-Off Recission Period for Buyers
The BC Government is now imposing a law that allows a Buyer to back out of the contract within 3 days of acceptance, but there is a penalty should a Buyer do so. It is not possible to waive this option under any circumstances.
ANY offer accepted by the Seller (including Subject Free contracts) will be subject to a THREE day rescission period for the Buyer which commences on the next business day after an offer is accepted. This excludes Saturdays, Sundays and holidays in BC and ends at 11.59 p.m. on the third business day. The 3 Day Recission Period runs concurrently with subjects. For example, an offer could be received on Wednesday, and be subject till Saturday BUT the Recission Period would not expire until midnight on Monday.
If the Buyer rescinds their offer during that time, a 0.25% rescission fee (calculated on the offer price) is applicable in favor of the Seller (ie/ $2,500.00 per $1,000,000)
It’s now more important than ever to have an experienced listing agent who not only knows the market, but can advise on which offers present the least amount of risk of rescission to the Seller.
3. Anti-Flipping Tax
Effective for 2023 any profit from a sale of a home sold in less than 12 months after purchasing will be declared as personal income (for an individual) or business income (for a company) – depending on the nature of ownership. This is a huge distinction, as it is no longer falling under Capital Gains Tax. This certainly shows CRA exerting another measure to ensnare those who are flipping real estate but also claiming the Primary Residence Exemption on their sale. In the past, CRA has audited some individuals under these criteria but now it is new law and removes their burden to argue usage of the home.
4. Changes to Strata Bylaws – Bill 44
Effective November 24th, 2022
i) Age Restrictions of 19+ years old are abolished – strata can no longer impose an age restriction to residents and owners UNLESS it’s a 55+-year-old restriction.
ii) Rentals may not be prohibited by a Strata. Effective immediately, Strata’s are no longer permitted to tell a homeowner that they cannot rent out their property. However, a Strata can consult with a lawyer to amend their bylaws to set the terms under which an owner can rent their unit. For example, a Strata could say “Minimum 6-month lease” or “No Nightly rentals” and/or change the penalties for violating a bylaw.
You can find more information here Building and Strata Statutes Amendment Act, 2022
5. Expansion of BC Speculation & Vacancy Tax Areas
In July 2022 there were additional areas added – Municipalities of North Cowichan, Duncan, Ladysmith, Lake Cowichan, Lions Bay and Squamish, in addition to the originally included areas from 2018 of Metro Vancouver, Fraser Valley, Victoria, Kelowna, Nanaimo and Lantzville. Speculation is that the BC Government will be announcing MORE areas to be added as this is proving to accomplish 2 things:
i) Increase revenue streams for BC ($78m last year)
ii) Reducing the number of exemptions filed and increasing the rental market housing
Tax is currently imposed on properties vacant for more than 6 months per year calculated at 2% of the Tax Assessed Value for Foreign Owners/Entities and 0.5% for Canadian Citizens
6. City of Vancouver – Empty Homes Tax Increase
The City of Vancouver EHT will be adjusted from 3% to 5% of the Assessed Property Tax Value for 2023. This tax impacts any property in C.O.V. that is vacant for more than 6 months of the calendar year.
7. Land Owner Transparency Act
By November 30, 2022, every corporation and any individual that holds property in Trust in British Columbia (including an unregistered, bare trust or a nominee and agency agreement), that is the registered owner of real estate or certain interests in land/real estate is required to file a transparency report pursuant to the Land Owner Transparency Act (LOTA). A Transparency Report is designed to disclose the ultimate beneficial individual(s) or controlling individual(s) of such property or other interests in land, which other interests include registered leases of more than 10 years.
Failure to file by the due date or the incorrect filing of a Transparency Report could result in fines starting at the great of $25,000 for individuals, $50,000 for a company or up to 15% of the value of the land or interest in land. You must have filed the Transparency Report before November 30, 2022, or risk facing such a fine. All corporations who are the registered owners of property received notice earlier this year notifying them of their requirement to file. Where the registered owner holds a property in trust, the Provincial Government may not have provided any such written notice of their obligation to file.
As always we are here to be your resource and help navigate all of these changes heading into the New Year. Give us a call at 604-676-0770!