Provincial Tax News: BC Introduces Anti-Flipping Tax

Evelyn Jacks

It’s Provincial Budget Time! First out of the gate on February 22, the BC government introduced a substantive budget which introduces a BC Family Benefit Bonus, increases the Climate Action Tax Credit, extends training tax credits, exempts farmers from participating in provincial agricultural insurance programs and most important, changes the taxation of real estate in the province, and introduces a new Home Flipping for 2025.  This is a substantive matter to discuss with clients during tax season 2024. Details follow:

First, good news:  BC Family Benefit Bonus.   Effective July 1, 2024.  This new bonus will be received in conjunction with the BC Family Benefit; that is, it will enhance it for the 2024/25 benefit year by 25%. The Benefit provides a family benefit and includes a single-parent supplement. Both the annual benefit amounts and the income thresholds used to determine eligibility will be enhanced for one year.  Payments will begin in July 2024 based on adjusted family net income, so filing a tax return is a prerequisite.   Over 70 per cent of BC families are currently eligible for the Benefit.

Climate Action Tax Credit.   Increased Effective July 1, 2024.  Offsetting the costs of carbon taxes paid, this credit will be increased as follows:

• Adults:from $447 to $504
• Spouses:from $223.50 to $252 (includes common-law spouses or first child in the family for single parent families)
• Children:from $111.50 to $126 per minor child.

In BC this credit is income-tested, so filing a tax return is necessary to get it. Income thresholds, at which point the credit begins to be phased out, will be increased.

The climate action tax credit helps offset the effects of carbon taxes paid by low- to moderate-income

Now the Bad:  A New Home Flipping Activity Tax.  Effective with Passage of Budget Implementation bill in early spring 2024,  this tax will be levied on properties sold on or after January 1, 2025, and in addition to any federal anti-flipping taxes and the provincial portion of taxes thereon.  

BC will impose the tax on the proceeds from the sale of residential real estate including housing units and properties zoned for residential use, and the assignment of such properties to others, if held for less than 2 years; with some “life exemptions” applying.  

Noteworthy is that properties sold after January 1, 2025 will be subject to the tax if they are purchased within two years of the sale; which means that the tax will apply even if the property was purchased before the effective date.

The tax will not apply to land or portions of land used for non-residential purposes. 

The anti-flipping tax rate is 20% for properties sold within 365 days of purchase but declines to zero if property is held between 366 and 730 days, adding a significant amount of complexity to the measure.

Exemptions are allowed when sale or property is within two years.  To begin with, for all sellers of principal residences within two years of purchase, a maximum $20,000 exemption will be allowed when calculating taxable income.

Otherwise, Life Event exemptions include:

• separation or divorce
• death, disability or illness
• relocation for work, involuntary job loss
• change in household membership
• personal safety
• insolvency

Industry exemptions include:

• Building that adds to the housing supply
• Engagement in construction and real estate development.

Property Transfer Tax Act -  First Time Home Buyers’ Exemption Threshold Increased.  Effective April 1, 2024.  This tax is eliminated for eligible first time home buyers, when fair market value of the purchase is below the designated threshold.

Effective April 1, 2024, the threshold is increased from a fair market value of $500,000 to $835,000, with the first $500,000 exempt from property transfer tax altogether. Then the phase out begins at $25,000 above the threshold, with the complete elimination of the exemption at $860,000.

Newly Built Home Exemption Threshold Increased.  Effective April 1, 2024.  The fair market value threshold for this exemption is increased from $750,000 to $1,100,000 and a phase out range begins $50,000 above the threshold, with the complete elimination of the exemption at $1,150,000.

Exemption for New Purpose‑Built Rental Buildings Enhanced.   Effective for transactions that occur between January 1, 2025, and December 31, 2030.  Purchases of new qualifying purpose-built rental buildings will be exempt from the general property transfer tax. This is defined as those properties that are non-stratified and held as rentals, on a monthly basis or longer, for at least 10 years.

Additional criteria:  the residential portion of the building must be entirely used for rental purposes and have at least four apartments.

Speculation and Vacant Property Tax Act. Effective January 1, 2024.  A person who possesses a residential property under a lease registered in the Land Title and Survey Authority of British Columbia will be treated as the registered occupier of the property for the purpose of the speculation and vacancy tax and be responsible for the tax. Registered leaseholders who are not already required to declare in 2024 will declare for the first time in 2025, based on the use of the property in 2024.

Business Tax Measures

Animation Productions Excluded from the Regional and Distant Location Tax Credits.  Effective June 1, 2024.  Animation productions will be excluded from eligibility. The change applies for animation productions under either the Film Incentive BC tax credit or the production services tax credit with principal photography beginning on or after June 1, 2024. The change is intended to  prevent a growing trend of animation companies using the credit to subsidize remote teleworkers, which is not the intended use of the credit.  However, animation productions will continue to be able to use basic tax credits under the Film Incentive BC and the production services tax credits, as well as the digital animation, visual effects and post-production services tax credits.

Training Tax Credits Extended.   Effective to the end of 2027.  These training tax credits support a diverse workforce by providing both apprentices and employers with an enhanced credit for apprentices with disabilities or who are First Nations. The training tax credit for individuals will be extended for one year to the end of 2025.

Shipbuilding and Ship Repair Industry Tax Credit Extended The shipbuilding and ship repair industry tax credit is extended for two years to the end of 2026.

Oil and Gas Exploration Expenses Excluded from the Mining Exploration Tax Credit Effective February 23, 2024, oil and gas exploration expenditures will no longer qualify for the mining exploration tax credit.

Insurance Premium Tax Act Exemption for Farmers Enrolled in Provincial Agricultural Insurance Programs.   Effective on royal assent, farmers are exempt from insurance premium tax when paying premiums for provincial agricultural insurance programs offered by the Ministry of Agriculture and Food.

Carbon Tax Act Biomethane Credit Refund.  Amended Effective April 1, 2024, the biomethane credit refund is to be based solely on the sum of the biomethane credits provided by the qualifying retail dealer in a reporting period. Refunds cannot be claimed on biomethane acquired or blended more than two years prior to the reporting period.

How to Make a Difference:  Discussing upcoming tax changes will help you help your clients to make sound choices about their tax planning activities to manage investment decisions with more acuity.

Knowledge Bureau will cover breaking tax and investment news from federal and provincial budgets at the May CE Summit on May xx including the following: