By Maria Starko, St. John. McCloskey and Chris Sharpe
On February 22nd, the Provincial Government released its 2024 budget (the “Budget“). The measures outlined in the Budget include measures intended to speed up the construction of new homes, increase the supply of middle-income housing, and fight speculation in the real estate marketplace. While many questions remain, the following is a brief summary of the real estate and tax implications from the Budget.
Home Flipping Tax
The Budget proposes to introduce a home flipping tax that will apply to income from B.C. properties sold or assigned on or after January 1, 2025. This includes properties purchased before this date if they are sold after and within two years. The tax rate is set to be 20% of income earned from properties sold within 365 days from the date of purchase and an amount which will decline to zero for properties sold between 366 to 730 days of purchase.
The purpose of the new tax is stated to be to discourage short-term holding of property for profit. However, notably, the government has promised an exemption for those who add to the housing supply, or engage in construction and real estate development, among others. The Budget promises details around the eligibility for these exemptions at a later date.
Speculation and Vacancy Tax Act: Leasehold Interests
The Budget proposes to amend the Speculation and Vacancy Tax Act effective January 1, 2024, to treat a person possessing a residential property under a lease registered with the Land Title and Survey Authority of BC as a “registered occupier”. This means that tenants with a lease registered in the Land Title Office will be responsible for the speculation and vacancy tax instead of the fee simple owners. Notably, many Indigenous Reserves and Treaty Lands are not taxed by the Speculation and Vacancy Tax, and therefore tenants in these locations may not be affected by this change.
Property Transfer Tax Exemptions
The Budget proposes to amend the Property Transfer Tax Act to expand certain exemptions. Effective April 1, 2024, the first-time home buyers’ exemption threshold will be increased so that eligible first-time home buyers are exempt from the tax if they buy a home with a fair market value of up to $835,000. This is an increase from the previous threshold of $500,000. The exemption will apply to the first $500,000, with a phase-out range of $25,000 above the threshold. The exemption will be completely eliminated at $860,000.
Effective April 1, 2024, the newly built home exemption threshold will be increased from $750,000 to $1,100,000. The phase-out range is $50,000 above the threshold, and the exemption is completely eliminated at $1,150,000. This exemption will apply to qualifying purchasers of a principal residence who meet the eligibility criteria.
There will also now be enhanced exemptions for transactions occurring between January 1, 2025 and December 21, 2030 of new qualifying purpose-built rental buildings. These are residential rental properties that are non-stratified and held as rentals on a monthly basis for 10 years or longer. The requirements include that the residential part of the building must be entirely used for rental purposes and have at minimum four rental units. These purchases will be exempt from the general property transfer tax.
The Property Transfer Tax Act will also be amended to clarify how to calculate interest on amounts owing or overpaid, effective October 1, 2024. In addition, the proposed amendments impose penalties for those who fail to provide certain required information, effective on royal assent.
Modern Treaty National Property Taxation
The Budget introduces a new approach to taxation of Nisga’a lands and Modern Treaty Nation Treaty Lands. These nations will have the choice of implementing their own property tax measures on their Treaty Lands, including the ability to exercise their own assessments and property taxation laws and policies. This involves amending the Nisga’a Final Agreement Act and the Treaty First Nation Taxation Act, and will be effective for the 2025 taxation year.
Income Tax Act
The Budget amends the provincial Income Tax Act effective December 15, 2022, to ensure the general anti-avoidance rule applies to transactions occurring on or after April 7, 2022, and bringing it more closely in line with the changes to the general anti-avoidance rule in the federal Income Tax Act.
The Budget introduces many tax-related changes that are complex and can involve highly fact-specific considerations. If you have any questions about how these measures may impact you, please reach out to a member of Clark Wilson’s Commercial Real Estate or Tax teams.
