Canada: What Developers Need To Know About The Speculation And Vacancy Tax

Last Updated: April 4 2019
Article by Edward L. Wilson, May Au and Yumeng Zhu

On November 27, 2018, the British Columbia provincial government enacted Bill 45, the Budget Measures Implementation (Speculation and Vacancy Tax) Act (the "Act"). Unless otherwise exempted, all owners of residential property in designated regions in British Columbia are required to pay the speculation and vacancy tax ("SVT") for the calendar year 2018 and beyond. The SVT is a part of the provincial government's plan to minimize speculation in the residential housing market and turn vacant and underused properties into homes for residents of British Columbia.

To give effect to these objectives, the provincial government also introduced an extensive list of exemptions, certain of which are applicable to developers in their capacity as owners of residential properties. These exemptions are intended to address concerns over the potential cost increases of developing residential projects due to the imposition of the SVT and the resulting negative impact on housing affordability and availability in British Columbia.

This article highlights the main exemptions available to developers of residential property. We will first provide a brief overview of the application of the SVT, followed by a more detailed review of the development-related exemptions. For additional information on the SVT, see our previous blog post here.


A. Who has to pay and how much is the SVT?

The SVT is payable by all owners1 of residential property (i.e. Class 1 property) in designated taxable regions of British Columbia.2 The taxable regions include large portions of Metro Vancouver and the Capital Regional District, and the Cities of Kelowna, West Kelowna, Abbotsford, Chilliwack and Nanaimo and the District of Mission.

The SVT will be calculated as follows:

SVT Payable = SVT rate × (owner's interest × assessed value of the property)

For 2018, the SVT will be levied at a single rate of 0.5%. For 2019 and subsequent years, the SVT will be levied at the rates of 0.5% for Canadian citizens and Canadian permanent residents who are not Untaxed Worldwide Earners (defined below), and 2% for foreigners, and Canadian citizens or Canadian permanent residents who do not declare the majority of their or their spouse's world-wide income on Canadian personal tax returns ("Untaxed Worldwide Earner"). Owners may be able to claim tax credits to offset the amount of SVT payable.

B. How much is the SVT for corporations, partnerships and trusts?

Residential properties held through corporations, partnerships or trusts may qualify for the 0.5% SVT rate, where all corporate interest holders (individuals who directly or indirectly control 25% or more of the votes or shares of a company), partnership interest holders and beneficiaries are Canadian citizens and permanent residents who are not Untaxed Worldwide Earners. A corporation without any corporate interest holders is subject to the SVT rate of 2%.

C. How to comply with the filing the Declaration and paying the SVT?

Each owner of a residential property is required to complete an annual declaration (the "Declaration") by March 31st in the year following the relevant taxable calendar year. A separate Declaration must be made for each owner of a residential property. Owners must file the Declaration to claim any exemption, and the failure to do so will result in the owner being assessed at the maximum SVT rate applicable for the tax year. Owners who owe any SVT amount to the government for 2018 must make the payment by July 2, 2019, or face interest-charges and penalties on late payments.


A. Vacant Land (2018 calendar year only)

For the 2018 calendar year only, the SVT will not be levied on land that did not contain a residence or part of an improvement intended to be a residence as of October 16, 2018.

B. Construction or Substantial Renovation

The SVT is exempted from residential property where all the following conditions are met:

1. Building activity commences in a calendar year in relation to the construction, placement or substantial renovation of a residence on a residential property, which may include any of the following activities:

  • applying for financing;
  • applying for a permit or other necessary approval;
  • entering into contracts for designing, building or engineering;
  • demolishing or removing existing improvements;
  • clearing or excavating the site;
  • constructing or placing the residence on the residential property or substantially renovating the residence; or
  • any other activity necessary for the construction, placement or substantial renovation of the residence;

2. The owner takes reasonable steps to ensure building activity progresses without undue delay, and if there is any undue delay the delay is caused by circumstances beyond the reasonable control of the owner; and

3. Because of the stage of building activity, the residential property does not yet include a residence, or the period in the calendar year during which the residence cannot be occupied (the "Minimum Non-Occupation Period") is 90 days.

C. Phased Residential Developments

Phased residential developments are developments of 5 or more residences on 2 or more residential properties where the development is carried out in phases and every owner of the residential properties is the same person or a related person within the meaning of Section 251(2) of the Income Tax Act (Canada).

The exemption for phased residential developments and the exemption for construction or substantial renovation have virtually the same conditions which must be met to claim the respective exemptions, with the one difference being that under the exemption for phased residential developments, the requirement for the Minimum Non-Occupation Period is at least 180 days (instead of 90 days).

D. Vacant New Inventory

Owners are exempt where the owner is the developer of 5 or more residences and at least 1 newly-built or newly-placed residence in the development has not yet been occupied, but has been offered to the public for sale in the calendar year.

E. Conservation of Heritage Property

Owners are exempt if a residence in a heritage property cannot be occupied for a period of at least 90 days in the calendar year due to any activity undertaken to protect, preserve or enhance the heritage value of the heritage property, if reasonable steps are being taken without undue delay to complete the conservations.

F. Tenancy Exemptions for Widely Held Owners

Corporate owners whose shares are listed or traded on a designated stock exchange or trustees of certain trusts including mutual fund trusts, real estate investment trusts, specific investment flow through trusts and trusts whose shares are listed or traded on a designated stock exchange may be exempted from the SVT for tenanted residential properties. To qualify for this exemption in 2018, a residence within the residential property must be occupied by a tenant under a tenancy agreement for periods each of which are not shorter than 1 month in duration and that total at least 3 months in a calendar year. To qualify for this exemption in 2019, a tenant must occupy the residence for not less than 6 months in a calendar year.

G. Tenancy Exemptions for Specified Owners

An owner of a residential property may also be exempted from the SVT if a tenant who occupies a residence within the residential property is (1) an arm's length party who may occupy the residence pursuant to a tenancy agreement, or (2) a non-arm's length party who occupies the residence for a longer period than any other place each month. The tenant must also occupy the residence for periods each of which are not shorter than 1 month in duration and that total at least 3 months in 2018, and at least 6 months in 2019 and each subsequent calendar year. This exemption is relevant to used residential property acquired for development purposes(for example, as a part of strata wind-up or land assembly) in which the acquired property is leased back to the vendor(s) or leased to new tenant(s) prior to the commencement of development.

III. Summary

Beginning in 2019, developers will be assessed the SVT, and are required to file a Declaration for each calendar year beginning in 2018. Developers who are owners of vacant land on October 16, 2018 should consider filing the 2018 Declaration to claim the vacant land exemption. As this exemption only applies for the 2018 calendar year, developers should consider the SVT implications of purchasing and holding vacant land without commencing building activities for subsequent years. In order to be exempt from the SVT, developers would need to commence building activities within the calendar year of purchasing the residential property, unless other exemptions apply. Developers of residential properties with fewer than 5 residences should also consider the SVT implications upon completion of building activities.

For additional information with respect to the SVT, please contact a member of the Lawson Lundell Real Estate Group.


1 The definition of "Owners" under the Act extends beyond the colloquial use of the word to include (among other things):

  • a registered owner in fee simple;
  • a registered holder of the last registered agreement for sale of a residential property;
  • a life tenant under a registered life estate in a residential property; and
  • a person occupying residential property under a registered lease (and in whose name the property is assessed under the Assessment Act).

2 The full list of the taxable regions of British Columbia is available here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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