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Late in 2016, Vancouver’s city council voted to approve the Vacancy Tax Bylaw. The tax came into effect on January 1, 2017. This means for the rest of 2017, property owners will need to keep track of the number of days their property is occupied. The first tax payment will be due in 2018.
For the first time in Canada, if a residential property in Vancouver is vacant for more than 50% of the year, the owner will be penalized. The tax is assessed at 1% of the property’s assessed value.
Vancouver’s mayor, Gregor Robertson believes the vacancy tax will increase the number of rental properties in the city and help alleviate a rental property crisis which has left thousands of the city’s residents struggling to find housing. Robertson is expecting “thousands of homes” to become available for rent by implementing this new tax.
Like most tax policy used to discourage a behaviour, there are unintended negative effects. Due to the high housing prices in Vancouver, some people have decided to sell their home in the city and live elsewhere, but chose to keep (or buy) a small condo in Vancouver as a second home when they do come to the city.
For example, Rob is a self-employed consultant. He moved his family from Vancouver to Nanaimo five years ago. Because the majority of his clients are in the Lower Mainland, he takes the seaplane over to Vancouver weekly. Rob purchased a one-bedroom condo in Gastown for the days he is in Vancouver. He would come to Vancouver on Monday morning, meet with clients during the week and stay in the Gastown condo until Thursday. He would fly back to Nanaimo on Thursday afternoon and spend the remainder of the week at home with his family.
The Gastown condo is not Rob’s principal residence. With holidays and long weekends spent at home in Nanaimo, Rob occupies the Gastown condo approximately 150 days a year. But because Rob uses the condo regularly each week, he is not able to rent it out for 30 consecutive days to third parties. Under the new Vacancy Tax, Rob’s apartment falls in the “vacant property” definition. Because of this, Rob will be paying $5,000+ of vacancy tax per year on this condo which means his cost of doing business in Vancouver has just increased by over $400 a month.
Rob is a classic example of collateral damage to this new tax.
Would Rob put his condo on the rental market? No, because he still needs it for 150 days each year so he can sustain his business. Can he rent out his condo on the weekends while he is absent? This doesn’t solve the problem, because the Vacancy Tax requires you to rent out the property for 30 consecutive days each time. And this is not even beginning to touch on the licencing issues in the City if you want to rent your home out on AirBnB.
This is an important example for many Vancouverites to consider as they navigate the introduction of the Vacancy Tax and how to best approach their tax strategy moving forward. While you may occupy your property in Vancouver regularly, this does not mean you escape the umbrella of the Vacancy Tax. If you have any questions or concerns about the Vacancy Tax, please discuss this with your tax advisor or contact Angela Chang, CPA, CGA, CAFM at 604.685.8408 or
Related Topics:Personal Tax; Income Tax
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