On January 1, 2025, the Residential Property (Short-Term Holding) Profit Tax Act (the “Flipping Tax Act”) came into force. This new legislation has implications for BC homeowners, buyers, and real estate investors alike. Here is what you need to know.
What is it?
The Flipping Tax Act taxes the profit that a seller earns from selling residential property in BC (including assigning pre-sale contracts), if the residential property is owned for less than 730 days (the “Flipping Tax”). The Flipping Tax Act intends to cool the BC real estate market and curb speculative residential property purchases.
How much is the Flipping Tax?
The Flipping Tax is 20% of net taxable income earned from a property sold within 365 days of acquiring ownership. If you have owned the property for more than 365 days and less than 730 days, the tax rate is reduced over time according to the formula below until it reaches a zero rate on the 730th day:
Tax rate = 20% [1 – ((Days held – 365) / 365)]
After owning the property for 730 days or more, the tax no longer applies.
Who does it apply to?
All sellers (which can include an individual, corporation, partnership, or trust) of residential property in BC need to be aware that if their residential property has been held for less than 730 days, a sale may attract Flipping Tax, unless an exemption applies.
Calculating the 730 day period
When determining whether or not a seller has met the 730 day requirement, the seller needs to consider the date that the rights to the residential property were acquired. In the case of a purchase, the closing date will generally mark the commencement of the 730-day period. In the case of a pre-sale contract or assignment, the seller is deemed to have acquired the property on the date that it acquires the right to acquire the property. Accordingly, the 730-day period would commence on the date the pre-sale contract or assignment agreement is entered into.
Exemptions and Deductions to the Flipping Tax
The Flipping Tax does not apply to certain groups such as Indigenous nations, registered charities, non-profit organizations, and government bodies. There is also a general exemption for builders and developers if they meet certain requirements.
Additional exemptions may apply in certain situations such as exclusive commercial use, separation, death, involuntary job loss, personal safety, or insolvency requiring the sale of residential property. There are also exemptions for transfers between related persons.
A seller may be able to apply for a deduction of up to $20,000 of the flipping tax payable, if: 1) it owned the residential property for at least 365 consecutive days before the sale; and 2) it lived in the property as its primary residence.
Filing a return
You must file a BC home flipping tax return with the BC Ministry of Finance within 90 days of disposing of a residential property if you have owned that property for less than 730 days, regardless of whether or not an exemption applies. The tax returns must be filed with the Ministry of Finance using eTaxBC.
If you have questions about the new Flipping Tax in BC or need assistance with your real estate transactions, please contact any member of our Real Estate team.
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Albert Chiu Lawyer | Real Estate Vancouver |
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Leona Lo Articling Student | Real Estate Vancouver |
This article is intended to be an overview of the law and is for informational purposes only. Readers are cautioned that this article does not constitute legal or professional advice and should not be relied on as such. Rather, readers should obtain specific legal advice in relation to the issues they are facing.