Housing Affordability Tax Changes: Part 2 - Vancouver Empty Residential Properties Tax (Vacancy Tax)

There is a rising concern in Vancouver British Columbia over the availability of unreasonably priced housing. In this second installment on housing afforability tax changes, our Manning Elliott tax team will look at the new Empty Residential Properties Tax (aka: Vacancy Tax) implemented by the City of Vancouver.

Which properties are subject to the Vacancy Tax?

All residential properties in the City of Vancouver are subject to the Vacancy Tax as of 2017, unless one of the following exemptions is met:

• The residential property is used as a principal residence by the owner, his/her family member or friend, or other permitted occupier for at least six months each calendar year.
• The residential property is rented for at least six months of the current year, in periods of 30 consecutive days or more.

Are there other Vacancy Tax exemptions available?

There are several exemptions available for the Vacancy Tax for specific situations that include:

• The property was not your principal residence, but you occupied it for at least 180 days of the year because you worked in the City of Vancouver. This doesn’t apply if the property was only used as a place of work and not a residence.
• The property was unoccupied for more than 180 days because you or your tenant were undergoing medical care, residing in a hospital or a supportive care facility.
• The property was unoccupied for more than 180 days because the registered owner is deceased and the estate hasn’t been administered.
• If there was a transfer of legal ownership during the tax year, the property will not be subject to the tax; however, the current registered owner is still required to submit a property status declaration.
• Your property was unoccupied for more than 180 days because:
  • The property was undergoing renovations; or
  • The property is vacant and part of a phased development
• The property was unoccupied for more than 180 days because of strata bylaw restrictions.
• The property was unoccupied for more than 180 days because the property was under a court order.

What is the Vacancy Tax rate?

Residential properties that are deemed to be vacant will be charged a tax of 1% of the property’s fair market value.  There is a late payment penalty of 5% as well as daily interest on arrears.

How is the Vacancy Tax enforced?

Residential property owners in the City of Vancouver must make a property status declaration each year, otherwise the property will be deemed vacant. The declaration for 2018 is due on February 4, 2019.

• Failure to make a declaration by the due date will result in a $250 penalty.
• False declarations can result in a fine up to $10,000 per day, in addition to payment of the tax.
• Only one owner is required to make the declaration on jointly owned properties.

Declarations can be selected for audit and the property owner will be required to submit sufficient evidence. A property may be audited up to two years after the declaration has been filed.

How is the Vacancy Tax enforced on residential properties which are sold/purchased during the year?

For purchases and sales of residential properties that are closing during the declaration period (November to February), the property status declarations should be made by the seller prior to the transfer of property. Buyers should request the completed and filed property status declaration as well as proof of payment of the Vacancy Tax if it applies, as the registered owner is responsible for paying the Vacancy Tax. If the seller hasn’t paid for the previous year, the buyer will be responsible for the tax and any related interest.

What are the Vacancy Tax issues we should be concerned with?

1. A property occupied by the owner but is not his/her principal residence would be subject to the Vacancy Tax unless the property is rented for at least 180 days.
2. If a property is listed for rent but the owner can’t find a tenant, the Vacancy Tax will apply, as owners are expected to reduce rent until a tenant is found.
3. If a property is listed for sale and sits empty for more than 180 days, the Vacancy Tax will apply.

If you still have questions about the Vancouver Vacany Tax, please contact the Manning Elliott Tax Team. We also invite you to subscribe to our mailing list so we can keep you up to date on all future tax related articles.

The above content is believed to be accurate as of the date of posting. Canadian and US Tax laws are complex and are subject to frequent changes. Professional tax advice should be sought before implementing any tax planning. Manning Elliott LLP cannot accept any liability for the tax consequences that may result from acting based on the information contained therein.