TAXES PAID WHILE HOLDING REAL PROPERTY

taxes that apply to the ownership and use of real property

Property Tax

-With the Property Tax system, a given tax rate applies with respect to each $1,000 of net taxable value (called a “mill rate”).

-The net taxable value is the actual value of the real property as determined by the assessor, less any exemptions that apply.

-This value, when multiplied by the tax rate, produces the amount of real property taxes payable.

-A mill rate of 4.62 means a real property tax of $4.62 for every $1,000 in net taxable value. If a property has a net taxable value of $1 million and the tax rate is 4.9762, then the tax payable is $4,976.20.

-no single statute in British Columbia that provides a comprehensive explanation of the Property Tax system

-Property is assessed by BC Assessment, a Crown corporation of the British Columbia government.

-The British Columbia School Act includes an additional school tax on certain residential properties assessed at over $3 million.

→ applies only to the portion of a residential property’s taxable assessed value that exceeds $3 million

→ 0.2% on the portion of the assessed value between $3 million and $4 million, and 0.4% on the portion of the assessed value exceeding $4 million.

The Tax Liability: Who Pays the Property Tax?

-the liability to pay the tax is on the owner of the interest in real property being taxed.

-the registered owner, who may or may not be an occupier, is liable for the Property Tax, and this includes the owner of a fee simple interest, a life estate, and the holder of an agreement for sale

- the Property Tax might be payable directly by a tenant, for example, even though they are not the owner.

- the holder or occupier is usually liable for the Property Tax on the land and all improvements on the land, if any, whether or not the holder or occupier owns or uses the improvement, with two exceptions:

1. Certain types of improvements, such as pipe lines, tunnels, bridges, roads, pole lines, cables, transmission equipment, or other continuous structures, may be assessed to the person owning, leasing, maintaining, operating, or using them. Since these types of improvements usually traverse many kilometres over hundreds of individual parcels owned either by private citizens or the Crown, it would be impractical to assess each segment of the improvement to each owner of the land over which they lie.

2. In the case of land cooperatives or multi-dwelling leased parcels, each residential building located on such property must be separately assessed.

The Tax Base: What Is Taxed?

-two general categories of taxable property in British Columbia are land and improvements

-The definition of land includes lands covered by water, quarries, sand, and gravel, but excludes coal or other minerals.

-Improvements includes virtually all property that is affixed to land.

The Basis of Assessment: What Value Is Taxed?

-The primary purpose of the assessor acting under the Assessment Act is to provide an equitable base of assessed (actual) values, with the appropriate classification, on which to apply tax levies for general, school, hospital, and other purposes.

-In British Columbia, the assessed value is the actual value of each parcel of taxable property.

-“Actual value” is defined in section 19(1) of the Assessment Act as the market value of the fee simple interest in the land and improvements.

-The relevant date for establishing actual value is July 1 of the year during which the Assessment Roll is completed.

-The primary difference between an assessment appraisal and a private fee appraisal is that the assessor for an assessment appraisal is constrained to certain dates and must value all interests in land.

-The Property Tax statutes also provide for special assessment, at other than actual value, for a variety of special types of utility and industrial lands and improvements

-The second important element of any assessment is the property class or classes that the assessor assigns

-each class of property may attract a different tax rate

• Class 1 – Residential

• Class 2 – Utilities

• Class 3 – Supportive Housing

• Class 4 – Major Industry

• Class 5 – Light Industry

• Class 6 – Business and Other

• Class 7 – Managed Forest Land

• Class 8 – Recreational/Non Profit Organization

• Class 9 – Farm

-A property with more than one use might fall into separate classes, and the assessor would divide the property’s value between the classes, resulting in a split classification

The Tax Rates: How Are They Set?

- is controlled by the taxation authorities, which set tax rates in the spring of each taxation year sufficient to raise their desired revenues.

-The principal taxation authorities include:

• municipalities;

• Surveyor of Taxes (rural areas);

• Ministry of Education (residential and non-residential properties);

• school districts (residential property only, if voters pass a referendum);

• BC Assessment;

• Municipal Finance Authority;

• regional districts;

• Regional Transit Commission.

-These taxing authorities levy various real property taxes that are appropriately grouped together as Property Tax.

Administrative Procedures

-The Assessment Notice and the tax notice are the methods by which the taxpayer in British Columbia is informed of the assessed value and tax liability of their property.

-Assessment Notice: a notice informing a property owner of the value of the property as of July 1 of the previous year; involves valuation

-A full Assessment Roll is completed using a valuation date of July 1.

-So, if the status of a property changes materially after July 1 but before October 31, the actual value of the property as of October 31 is the value that will be used for the Assessment Roll. The Assessment Roll must be completed by December 31

-generally no obligation for an owner who renovates their property between July 1 and October 31 to report such renovations for valuation purposes.
-Since Property Taxes are paid for a calendar year, the amount of the taxes for the year must be apportioned between the parties as of the adjustment date on the Statement of Adjustments,

-an increase in the assessed value of real property does not necessarily mean an increase in Property Taxes.

-Tax Notice: a statement distributed to each property owner within a municipality requesting the payment of taxes based on the net taxable value of their property

-Municipalities and other taxing authorities set the tax rates each year. The municipalities or the Surveyor of Taxes issues tax notices in the spring.

-The tax rates are multiplied by the appropriate net taxable values to calculate gross taxes payable in respect of a particular property.

Exemptions and Reliefs

-A partial list includes properties owned by the Crown, both federal and provincial, unless occupied by a non-exempt occupier, and churches and other places of worship.

- The motives may be based on benefits for charitable organizations, administrative convenience, a desire to redistribute the tax burden based on some provincial policy, or a desire to influence a particular form of land use.

-certain classes of property are granted mandatory, full, or partial exemptions from taxation because of their ownership

-A partial list includes properties owned by the Crown, both federal and provincial, unless occupied by a non-exempt occupier, and churches and other places of worship.

-Relief is also provided from assessment depending on the use of the property.

-basis other than full market value is used in some cases to provide a measure of protection or relief for specified land uses, such as farm land, forest land, and certain residential property

-The Home Owner Grant Act states that an owner of an eligible residence, who is the registered owner of the property, is ordinarily resident in British Columbia, is a Canadian citizen or permanent resident of Canada, and occupies the property as their principal residence, is entitled to a basic grant.

-he grant amount also varies based on the value of a property and the Property Taxes payable.

-owners must generally pay at least $350 in Property Taxes before obtaining the benefit of the grant, so it does not cancel out the Property Tax bill of owners with lower value homes.

-Additional grants are available, under different terms, for seniors, veterans, and others.

-Furthermore, upon receipt of the tax notice, an owner may be able to apply for a low-interest loan and defer payment of the current year’s Property Taxes (the regular program and the families with children program)

-The tax deferral arrangement appears on title as a registered charge, and the loan accrues interest.

-Deferred taxes and interest must be repaid before a property can be sold or legally transferred to a new owner.

Assessment Appeals

-Any person may, under the Assessment Act, make a complaint against an entry in an Assessment Roll on one or more of the following grounds:

• the name of a person has been wrongfully included in or omitted from the roll;

• a property has been wrongfully included in or omitted from the roll;

• a property has been valued at too high or too low an amount;

• a property has been improperly classified (e.g., as farmland); or

• an exemption has been improperly allowed or disallowed.

-not only may the owner of a property complain that the property has been incorrectly assessed, but also some person other than the owner may complain that the property has been incorrectly assessed for any of the reasons set out above.

Speculation and Vacancy Tax (“SVT”)

-annual tax that is payable by any registered owner or co-owner of residential property located in designated taxable regions of British Columbia, unless the owner qualifies for an exemption.

-Each residential property owner in the designated taxable regions will have to complete an annual declaration.

-Where there are multiple owners of a property, a declaration must be completed for each owner, including spouses.

-to curb property speculation, and to help turn vacant and underutilized properties into homes for people who live and work in British Columbia’s urban centres.

-Residential properties located within the City of Vancouver may be subject to both the SVT and the City of Vancouver’s Empty Homes Tax,

Taxable Regions

-Reserve lands, treaty lands, and lands of self-governing Indigenous Nations are not part of the taxable regions.

-Islands that are accessible only by air or water are also not part of the taxable regions.

-Some residential properties are excluded from the SVT even though they are located within a taxable region, including:

• an Indigenous Nation;

• municipalities, regional districts, governments, and other public bodies;

• registered charities;

• housing co-ops; and

• certain not-for-profit organizations.

Tax Rate

-The SVT rate varies depending on the owner’s tax residency

• 2.0% for foreign owners and satellite family members; and

• 0.5% for Canadian citizens or permanent residents of Canada who are not members of a satellite family.

-Where there are multiple owners of a property, each owner’s percentage interest in the property will be multiplied by the assessed value before applying the rate in order to determine the tax amount for that particular owner.

Satellite Family

-an individual or spousal unit that declares less than 50% of their total combined household income for the year on Canadian income tax returns.

-an individual may be considered part of a satellite family even though they are a Canadian citizen or British Columbia resident.

Corporations, Partnerships, and Trusts

-The SVT also applies to corporations, partnerships, and trusts that own residential property within the designated taxable regions

-These entities must also provide annual tax declarations in respect of their residential property and may be eligible for exemptions and tax credits provided by the Act

Tax Declaration Letter

-sent out by the Province by mail to each owner in January in respect of the previous calendar year.

-will list all the residential properties owned by the person in the designated taxable region

- Where there are multiple owners of a home, a declaration must be completed by each owner, including spouses.

-The declaration must be completed and returned even if the owner believes that they are not eligible for an exemption.

Principal Residence and Rental Exemptions

-Many British Columbia home owners affected by the SVT are able to claim the principal residence exemption (and not have to pay any SVT) because they live in their home full-time and their home is their principal residence for the calendar year

-the owner must also be a Canadian citizen (or permanent resident of Canada) who is a British Columbia resident for income tax purposes, and not part of a satellite family.

-for the rental exemptions, the property must be occupied by a tenant for at least six months of the year, in increments of one month or longer.

-Once the occupation period requirement is met, each owner of a rental property will be eligible for an exemption in respect of an arm’s length tenant, so long as there is a written tenancy agreement in place under the Residential Tenancy Act.

-An owner who is a Canadian citizen or permanent resident of Canada, and is not a satellite family member, will also be eligible for this rental exemption in respect of a non-arm’s length tenant, so long as the residence is the tenant’s principal residence

-An owner who is not a Canadian citizen or permanent resident of Canada may be able to claim an exemption in respect of a non-arm’s length tenant if the tenant earns and reports income in British Columbia that is equal to at least three times the market value rent of the property.

Additional Exemptions

-Besides the main exemptions outlined previously, there are also a number of exemptions available for special circumstances, such as major home renovations and life events (e.g. divorce or illness).

-hazardous or damaged property; year of acquisition; medical absence from primary residence; spousal separation; bankruptcy; death; testamentary trusts for minors; properties with rental restrictions; strata accommodation units; licensed daycares; and land under development.

Tax Credit Eligibility

-Those not eligible for an exemption may qualify for a tax credit.

-British Columbia-resident owners are eligible for a tax credit of up to $2,000 on a secondary property.

-Non-British Columbia resident Canadians will be eligible for a tax credit based on their income earned in British Columbia, if any.

-However, the tax credit cannot reduce the tax rate below the tax rate for an equivalent British Columbia resident

- unused tax credits may be carried forward for up to two years or transferred to a spouse.

-Foreign owners and members of satellite families can claim a tax credit equal to 20% of any income earned in British Columbia to reduce the 2% SVT owing

-Unused British Columbia income may be carried forward for up to two years or transferred to a spouse.

The City of Vancouver’s Vacancy Tax1

-The City of Vancouver’s Vacancy Tax By-Law No. 11674 (the “Bylaw”), provides that homes in Vancouver that are unoccupied for six full months of the year or more will be subject to a 5% Empty Homes Tax (EHT).

-Homes that are determined or deemed to be vacant will be subject to an EHT equal to 5% of the property’s taxable assessed value in addition to the existing Property Tax owed.

Who Is Subject to the EHT?

-Most Vancouver homes will not be subject to the EHT.

0Residences being used as a principal residence by the owner, a family member, or a friend for at least six months of the tax year will not be charged the EHT, nor will properties that are rented long-term (with a written tenancy agreement) for at least 30 days in a row for a minimum of six months in aggregate over the course of a year.

-Investors renting their investment property out for six 30-day terms throughout the year will be exempt from the tax, even if those six 30-day terms are not consecutive.

-Investors using their property as a short term rental (Airbnb) without a hotel or B&B licence (which would be in breach of the City’s Zoning & Development By-law) will be subject to the EHT,

Annual Declaration

-In December of each year, all owners of residential properties in Vancouver will receive instructions to complete a Property Status Declaration (PSD) from the City that must be completed and returned to the City.

-If the owner fails to submit the PSD before the deadline, the property will be deemed to be vacant and subject to the EHT.

-False declarations can result in a fine of up to $10,000, in addition to the payment of the tax.