Every week, Mansion Global poses a tax question to real estate tax attorneys. Here is this week’s question.
Q: I'm in Hong Kong and looking to buy a $2 million property in Vancouver. How do the new tax changes affect me?
A: The 2018 British Columbian budget brought some changes to the way foreign investors are taxed, lawyers said.
Now, there are two types of taxes foreigners intending to own real estate around Vancouver will be subject to, said Michael Drouillard, a lawyer at Vancouver-based Harper Grey.
"The provincial government already imposes a 15% tax on any foreign national purchasing residential real estate in the Lower Mainland," Mr. Drouillard said. "The new tax changes propose to increase this tax to 20%."
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The area where the foreign-buyers tax—or the "additional property transfer tax"—is charged was also expanded. It had been just a tax in Vancouver but now will "expand its application beyond the Lower Mainland to include much of southern Vancouver Island, the central Okanagan and the Fraser Valley," Mr. Drouillard said.
And, if the home is not used as a primary residence or long-term rental property, and/or if the buyer does not have provincial income tax to credit the tax against, a new speculation tax might also apply on an annual basis, lawyers said.
To that end, the British Columbian government announced the introduction of a speculation tax later in 2018 but hasn’t provided specifics as of yet.
"This tax is aimed at persons who pay little or no income tax in British Columbia," said Riley Burr, a partner at Norton Rose Fulbright in Canada.
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"The tax rate will be 0.5% of the taxable assessed value for the 2018 tax year and 2% thereafter, and will function much like a vacancy tax in that respect," he said.
The tax will apply to Vancouver, Fraser Valley, Kelowna and West Kelowna and the Nanaimo and Capital regional districts, Mr. Burr said.
The speculation tax hasn’t been OK’d yet and its terms could be adjusted, however, according to Mr. Drouillard.
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