International citizens looking to invest in Canadian real estate need to factor in 2 highly punitive taxes: the Foreign Buyers Property Transfer Tax, and the BC Speculation and Vacancy tax. Here’s how much you’ll pay, and how you can avoid or reduce your tax liability.
Property Transfer Tax
When you buy property in British Columbia, you’re obliged to pay a property transfer tax that varies with your home’s fair market value. This tax applies to both Canadians and foreign nationals.
The property transfer is calculated as 1 percent of the first $200,000; 2 percent of the value between $200,000 and $2,000,000; and 3 percent on values above $2,000,000. Residential properties face an additional 2 percent bracket on fair market values over $3,000,000.
Some reductions are available to first-time buyers or builders.
Foreign buyers face an additional 15% property transfer tax on fair market value.
Foreign-buyers Tax
In an attempt to cool BC’s hot housing market, the Foreign Buyers Tax was introduced in 2016 by the BC government as an additional 20 percent property transfer tax on out-of-country investors.
If you’re not a Canadian citizen or permanent resident, you’ll be obliged to pay the 20% Foreign-buyers tax.
Speculation and Vacancy Tax
When the foreign buyer’s tax did not produce its intended effect, BC introduced the new speculation and vacancy tax.
This annual surcharge applies to foreign buyers and foreign owners. BC homeowners that do not use a dwelling as their primary residence face a 0.5% annual tax on their property’s assessed value. Foreign nationals and corporations who report income outside of Canada are on the hook for a more punitive 2% annual tax.
If you’re not planning to live in your home for at least 6 months of the year, here are three practical ways to avoid paying the BC speculation tax:
- Rent out the home for at least 6 months of the year as a vacation home or student dwelling.
- Let one of your members occupy the property, or at least one building on the property like a guesthouse.
- Hire a live-in caretaker who pays some amount of rent.