Understanding BC’s New House Flipping Tax

What Homeowners Need to Know

The B.C. government has implemented a new house flipping tax (the “House Flipping Tax”) under the Residential Property (Short-Term Holding) Profit Tax Act (the “Act”), effective January 1, 2025. The House Flipping Tax applies to the profit earned from the sale of a residential property that is sold within 730 days of the date of acquisition of the property. If you are a homeowner or planning to sell a property in British Columbia, here is what you need to know. Navigating provincial shifts is essential for homeowners, alongside federal incentives like the first-time buyer rebates that may apply to your next purchase

Purpose of the House Flipping Tax

|The House Flipping Tax is part of the BC Government’s ‘Homes for People Plan,’ aimed at increasing housing affordability and reducing housing price inflation. This tax targets property speculators and discourages short-term property flipping for profit.

What is the House Flipping Tax?

The House Flipping Tax applies to residential properties sold or disposed by a person (which can include an individual, corporation, partnership or trust) in less than 730 days (approximately two years) of ownership. The tax rate is calculated as follows:

20% of the net income if the property is sold within 365 days of acquisition.
gradually decreases for properties sold between 366 and 729 days.
zero if the property is sold after 730 days of ownership.

Notably, the House Flipping Tax applies to properties purchased both before and after January 1, 2025, if they are sold within 730 days of ownership.

The disposition/sale of taxable property, under the Act, generally refers to transfer of a beneficial interest in residential property in exchange for money or other consideration. Therefore, according to the BC Government, if in a transaction, the name of the registered owner changes on title, but the beneficial ownership does not change, then it may not be considered a sale of taxable property, and the House Flipping Tax may not apply. An example of this situation could be where a property is held in a bare trust. If the party who is the registered owner on title (i.e. the bare trustee) changes, but the beneficial owner remains the same, then the House Flipping Tax will not apply.

Pre-Sale Contracts and Assignment

It is important to note that a taxable property refers to a beneficial interest in a residential property, or a right to acquire a beneficial interest in residential property (including pre-sale contracts). If you sell the right to acquire a residential property, such as by entering into an assignment of a purchase contract for a pre-sale build condo, then the House Flipping Tax will apply to the profit that is earned on such a sale.

For the purpose of the calculation of days of ownership for pre-sale contracts, the day you purchase a presale contract is generally the date that you enter into the presale contract. If you purchase the presale contract directly from a developer, this is generally the date you pay the contract deposit to the developer.

The day you sell or assign a right to acquire a property, for example a presale contract, is generally the date you receive money from the purchaser or assignee for the right.

Are you exempt?

The Act provides several exemptions for specific situations, including:

First Nations Reserve Lands: Residential properties on these lands are not subject to the tax.
Divorce or Estate Distribution: Sales due to divorce or the distribution of an estate are exempt.
Foreclosure Sales: Residential properties sold under foreclosure are excluded.
Development Contexts: Certain development-related circumstances may qualify for exemptions.

While certain life events trigger exemptions, ensuring your settlement is enforceable often requires obtaining consent orders to protect your interests. Some exemptions apply automatically, but others require filing a tax return and supporting documentation.