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The BC government introduces more ineffective, optics-based legislation -the Anti-Flipping Act

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When the NDP came to power in 2017 they introduced a 30 point program to make home ownership more affordable and to increase the stock of rental properties thereby making rents also more affordable.

How has that worked out so far?

Rents are still the highest in the country (approximately $2,700/mo. for a one bedroom in Vancouver) and so are homes (the average home in Vancouver is about $1.2M).

Rather than admit failure, like the federal government, the NDP just doubles down and introduces more legislation.

The latest iteration is the Residential Property (Short Term Holding) Profit Tax Act, commonly known as the BC Anti Flipping Tax, which came into effect on January 1, 2025.

Presumably, the Federal Anti-Flipping Tax (which applies across Canada) was not a sufficient deterrent to property flippers in BC. The federal anti-flipping rule introduced in the 2022 federal budget, removed the tax exemption for sale of a principal residence beginning on January 1, 2023 when a home was sold within 12 months of its purchase date. Any resulting profit was deemed to be fully taxable as business income. Losses however were NOT allowed to be written off. Exemptions were granted for death, divorce, serious illness or disability, job loss, insolvency or eligible relocation.

What is this tax?

The BC Anti-Flipping Tax imposes a 20% tax on any profits made from the sale of residential property in BC within the first year of ownership, with that percentage proportionately decreasing to nil by the end of year two.

As a general rule, legislation is supposed to be drafted to have prospective effect, meaning that it applies from the date of its enactment to subsequent transactions and events. Hence the BC Anti-Flipping Tax should only apply to any properties purchased after January 1, 2025 and sold within two years of the purchase date.

Instead the government has made the two year holding period retroactive to January 1, 2023, meaning that if you bought a home in June of 2023 for example, and sold it now, you would have to pay Anti-Flipping tax to the BC government on any profits made -despite the fact that such legislation was not even in the discussion stage when you bought your home. To avoid paying said tax, you would have to hold the property until June of 2025 in this example.

There is no rationale for making the tax effective retroactively other than to obtain more tax revenue for a fiscally irresponsible provincial government that is drowning in red ink (currently running a $9.4B annual deficit with no end in sight).

What does the tax apply to?

The tax applies to the profits on the sale of taxable residential properties such as houses and strata units (but not manufactured or float homes). Transfer of a right to acquire a taxable residential property is also subject to the tax (such as the assignment of a presale contract to buy a condo).

Sale means the transfer of beneficial (real) ownership in exchange for money or other consideration. Thus a gift of property or the transfer of legal title only are not subject to this tax (nor is a lease, mortgage or "deemed disposition" under the Income Tax Act).

What does the tax not apply to?

The tax does not apply to commercial properties (or residential properties that have been used only for commercial purposes) or "exempt entities" such as the government, registered charities, co-ops, Indigenous nations, public bodies, municipal corporations, housing corporations and non-profits or "exempt locations" (generally First Nations properties).

Other exemptions

A property sale is exempt if it was the result of a 1) death, 2) serious injury or disability, 3) eligible relocation, 4) change in household membership, 5) divorce or separation, 6) job loss, 7) threat to personal safety, 8) bankruptcy, 9) home was destroyed or expropriated, 10) property was won in a lottery, 11) foreclosure or 12) if a presale, the completion date was delayed by more than a year. Note exemptions 1 and 9-12 are available to corporations and partnerships as well.

Builders and developers are generally exempt from the tax.

The tax does not apply to sellers who build a new house or carry out a substantial renovation or increase the habitable area of the house by double. Details and restrictions apply.

Sales between related individuals are also exempt (related means married, common-law, adopted or connected by blood relationship)(or in some cases, friends who bought the property together and resided there for at least a year).

Do you have to file a tax return?

It depends.

No return is needed if: 1) you have owned the home for over 2 years, 2) you are a property developer, 3) the property is in a exempt location, 4) you are an exempt entity, or 5) the property was used only for commercial purposes.

A return must be filed within 90 days of sale if: 1) you owned the property for less than two years and you are not eligible for the exemptions noted in the immediately preceding paragraph. "Other exemptions" noted above require a return to be filed. 

If you don't file a return when required, you can face a monetary penalty.

What can you deduct?

The items that can be deducted include real estate commission, legal fees, appraisal costs, home inspection and survey costs. Appraisal, home inspection and survey costs are generally paid for by the buyer, so it is unclear why they would be included.

Will the Anti-Flipping Tax work as advertised?

Why would it?

Firstly, property flipping is a fairly rare phenomenon in BC. A recent CBC article estimated only 2.8% of properties were sold within a year of purchase Home Flipping in BC

Secondly, excess demand causes home values to increase, not property flipping. If housing supply is increased or demand is decreased, property flipping will virtually disappear. Irresponsible immigration policies whereby over a million people a year were invited into a country which averaged only a 192,570 housing starts per year between 1977 and 2024, contributed to excess demand, which in turn led to spiraling prices. In addition, the BC government actively encouraged foreign ownership of BC real estate up to 2016 by carrying out numerous "trade missions" to Hong Kong and other jurisdictions to incentivize buyers to "invest in BC" by purchasing real estate here.

Thirdly, the vast majority of "property" flips in BC involve presale contracts. Due to their fairly long closing dates, the newly built strata units can appreciate significantly over several years, often creating an incentive for the buyer to flip (assign) the contract prior to completing the purchase (thus avoiding closing costs, GST, Property Transfer Tax and the like). But rather fixing the problem by banning presale assignments, the NDP simply created a new government registry (the Condo and Strata Assignment Integrity Register (CSAIR) to monitor them. 

Lastly, if the NDP's track record since 2017 is any indication, the tax will serve only to create or expand another government bureaucracy to administer the tax and add another layer of red tape to the average real estate transaction in British Columbia.


End

(c)(2025) Pazder Law Corporation


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