It is no surprise that British Columbia’s Budget (announced February 20, 2018) strives to promote affordable housing and cool the real estate market in key urban areas, with particular focus on foreign purchasers. But the details yield some surprises. With the announced real estate-related tax initiatives projected to account for approximately $1.3B in additional revenue to the Province over the next three years (See Budget and Fiscal Plan, page 8, Table 1.3) , the Provincial Government’s dependence on real estate-related tax revenue is ever deepening. Here are the highlights:

  • Taxation of Beneficial Transfers: Not Yet: Although it had been generally anticipated that the “loophole” whereby beneficial (unregistered) transfers of land are not subject to transfer tax would be closed, this change was not made. But it appears certain that beneficial transfers will become taxable at some point, and initiatives were announced in support of that goal.
    • The Province intends to require reporting of additional information on transfer tax forms (which must be filed for non-transfer activities, such as a change of name or amalgamation of a registered owner).
    • A publicly-available beneficial owner registry is to be established, and is intended to be shared with federal and provincial tax and law enforcement authorities. “The concealment of beneficial ownership can be part of international webs used to facilitate tax evasion, money laundering, corruption and other criminal activities.” (See Budget and Fiscal Plan, page 84).
  • Transaction-Related Value Disclosure: In the past 24 months, the Ministry of Finance has stepped up the pace of investigations following the completion of both registered and beneficial transfers of land. Even when registered ownership has not changed, Land Title Office financing and closing-related filings often show that a change of ownership has occurred, as does media coverage of major transactions involving real estate. While parties to a transaction will typically agree on the value to be attributed to the real estate components of an asset or share sale, disclosing the sale contract is never desirable. We are now warned of legislative changes facilitating collection of information from transferees and broadening access to information from the Multiple Listing Service (MLS) database.
  • New “Speculation” Residential Property Tax: Beginning in the fall of 2018, residential property in Metro Vancouver, Fraser Valley, Nanaimo and Capital (Victoria) regional districts, as well as Kelowna and Kamloops will be subject to an initial 0.5% (2018) increasing to 2.0% (2019) additional annual property tax for owners who do not pay income tax in B.C. Exemptions will be available for principal residences and qualifying long-term rental properties.
  • Increased/Expanded Foreign Buyers’ Tax: Further to the 15% Foreign Buyer Tax (FBT) invoked in 2016 for residential property in Metro Vancouver, the FBT was increased to 20% on February 21, 2018, with no grandfathering for transactions under contract. The FBT was also expanded to the Fraser Valley, Nanaimo and Capital (Victoria) regional districts, as well as Kelowna and Kamloops, but with a three month grandfathering period. The FBT impacts not only personal residences, but all property assessed as residential.
  • Residential Property Valued at over $3M: Increased Transfer Tax and Property Tax Rates: Residential properties having an assessed value of over $3M will incur transfer tax of 5% for the portion of the value over $3M (an increase from 3%). In addition, annual school (property) taxes for such high-value property will increase for the portion of assessed value between $3M and $4M (0.2%) and the portion of value exceeding $4M (0.4%). Although stated to target "luxury" homes, this increase affects all properties assessed as residential, including multi-unit rental properties.

Details of many of the announced measures are not yet available.

Here is a link to the Budget and Fiscal Plan 2018/19 – 2020/2021: