Clause for Concern?
TAGS: Property Transfer Tax Speculation and Vacancy Tax Taxation
Understanding who pays the Speculation and Vacancy Tax in a transaction
REALTORS® don't have to worry about including a clause in a contract of purchase and sale that specifies that a buyer won't be held liable for the Speculation and Vacancy Tax (SVT). Here's why:
- When a buyer purchases a residential property, they will either pay the Property Transfer Tax (PTT) or be exempted from the PTT because they took advantage of an exemption like the First Time Home Buyers' Exemption or Newly Built Homes Exemption. Payment of the PTT (or exemption) means you're eligible for an exemption of the SVT for the year of purchase.
- The SVT is levied on the person who owns the property on December 31 of the calendar year. That means if the seller transfers a property before December 31, they will not receive a declaration for said property for that calendar year. The new owner will receive a declaration but won’t be subjected to the SVT for that calendar year because they will have either paid the PTT or been exempted from it.
When the seller has outstanding taxes
If a seller owes the SVT from previous years and sells the property without paying back taxes, the seller remains responsible for paying overdue SVT. In other words, the speculation and vacancy tax follows the person (seller), not the property. If there is a lien on a property due to unpaid SVT, it will appear on the land title just like any other charge would.
Understand how the SVT impacts clients in your region
While the tax doesn't impact all of BC, it's important to familiarize yourself with the area you practice business the most. Also, don't forget that your managing broker is a great resource if you have questions about what taxes apply to a specific transaction.
For more information on the SVT, a complete list of exemptions, and to learn what is new or has changed about the speculation and vacancy tax, please visit the provincial government's website.
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