B.C. vacation-property owners are now subject to new rules and taxation when renting their property – but some say illegal rentals may dodge tax.
Since October 2018 when the legislation came into effect, short-term accommodation providers in B.C. have had to collect and remit Provincial Sales Tax (PST) and Municipal and Regional District Tax (MRDT) revenues, intended as a way to level the playing field in the accommodation sector.
“The intention is to make this a fairer process so that people who are providing short-term accommodation are remitting the same amount of taxes (as other accommodation providers), so that’s all good,” explained Whistler Mayor Nancy Wilhelm-Morden.
Mathew Hick, of accommodation listing service alluraDirect, said it’s still too early to say what the additional taxes – PST in B.C. is 8 per cent, while the MRDT in Whistler is currently set at 2 per cent – will mean for B.C. tourism.
For many who own recreational lakefront property or perhaps a golf course condo, this is the first season that they will be dealing with the new rules.
The shift in how the taxes are applied does raise a number of issues, Hick explained.
If a property is listed exclusively on a website like Airbnb or alluraDirect that collects and remits tax on the owner’s behalf, not much will change. But for owners who list a property themselves, or through a website that does not collect and remit taxes, they will have to register to collect PST on their own. (The only exemptions are for properties not listed online that generate less than $2,500 in gross annual revenue and are not expected to exceed that amount in the following year, and for accommodations renting for 27 days or more at a time.)
That’s where Hick sees a possible dilemma: how to ensure the tax revenues collected are coming from legal rental properties?
“The provincial government requires us to collect and remit the PST and MRDT for our clients. Unless we’re confirming that all our properties are legitimate, the government doesn’t know what we’re submitting, so the onus is going to be on the companies themselves to do the honourable thing and only rent legal [properties],” he said. “That’s possibly where the conflict of interest comes in: what happens when you have an extra couple hundred thousand dollars of tax revenue that’s potentially coming from illegal rentals? How is that conversation going to go? It’ll be interesting to see how this evolves.”
Last year, the Resort Municipality of Whistler began requiring short-term rental properties in specifically zoned neighbourhoods to have a business licence. Hick suggested tying the tax remittance to the business-licensing process as a way to ensure the revenues are coming from a legitimate source.
Wilhelm-Morden noted that the province is responsible for ensuring compliance on accommodation tax remittance, “so we’re going to see how they do with that and if there are gaps in that compliance process that we could fill with our business-licence process.”
Taxing questions answered
Matthew Hick, CEO of alluraDirect, breaks down B.C.’s short-term rental regulations and taxes.
1. Do you need to be charging tax?
Yes, all legally operated short-term rentals in B.C.are required to charge the Provincial Sales Tax (PST) and Municipal and Regional District Tax (MRDT) where applicable. Reservations for 27 nights or longer are exempt.
2. What are the two different taxes?
The Provincial Sales Tax is charged at 8 per cent for accommodation. The Municipal and Regional District Tax varies, but in the Whistler area it is two per cent. Check with your local council.
3. What’s happening with the exemption for fewer than four units?
It’s gone, effective last October. All short-term rentals will need to charge PST and MRDT where applicable, unless you rent only exempt accommodation short-term.
4. What happens to people who don’t charge the tax?
The tax has to be paid, so if you charge your guests incorrectly, it comes out of your pocket.
Copyright © Western Investor