The Residential Property (Short-Term Holding) Profit Tax Act (the Home Flipping Tax Act) came into force on January 1, 2025.¹ As noted in our insight, British Columbia’s home flipping tax: Overview and implications, this legislation introduces a new tax on profits made by those who sell residential properties within two years of their acquisition.² This legislation attempts to discourage people from selling homes quickly at a profit, in an attempt to make homes more affordable (or at least keep them from becoming even more unaffordable than they already are).

1. Key aspects

Profits from the sale of residential properties within 730 days of acquisition are taxable under the Home Flipping Tax Act. The applicable tax rate varies based on how long the seller has owned the property. If the property is sold within 365 days of acquisition, the tax rate is 20% of the net taxable income earned on the disposition.³ If the property is sold more than 365 days after but less than two years before the date of acquisition, the tax rate decreases according to this formula⁴:

As 730 minus 365 = 365, after 730 days of ownership this formula equals zero.

As mentioned in our previous insight, the Home Flipping Tax Act applies to residential properties even if they were acquired before January 1, 2025, so long as it is disposed of after that date.⁵

2. The test for taxable property

The Home Flipping Tax Act defines “taxable property” as either a beneficial interest in residential property or the right to acquire a beneficial interest in residential property.⁶ This means a contract of purchase and sale in respect of residential property, being a right to acquire a beneficial interest in such property, may be a taxable property (although there are contrary arguments). Commercial properties are excluded from this definition. “Residential property” is defined as either: (a) a housing unit in British Columbia with land subjacent or immediately contiguous to the same, or (b) land that is zoned all or in part, for residential use and no part of the land, building or other structure is otherwise included in (a).⁷

The Home Flipping Tax Act applies also to profits earned from the assignment of pre-sale contracts.⁸ Notably, the date a purchaser acquires the residential property for purposes of the Home Flipping Tax Act is deemed to be the date the purchaser enters into the pre-sale contract. When assigning a pre-sale contract, the original purchaser is considered to have disposed of and the new purchaser is considered to have acquired the residential property on the date of unconditional assignment. This is the date that determines the applicable tax rate as set out above.

3. Commercial properties and mixed-use implications

The Home Flipping Tax Act defines “commercial property” as a portion of residential property used for a commercial purpose.⁹ This definition is intended to capture residential properties that are used for non-residential purposes such as an office, restaurant or retail use. The definition of “commercial purpose” excludes several common business uses for real estate such as: (a) holding the property for sale; (b) renovating the property for sale; (c) providing accommodation through tenancy agreements or short-term vacation rentals; (d) a non-residential purpose carried out in a housing unit; and (e) any other prescribed purpose. If a portion of property is used for these excluded purposes, then it is not considered “commercial” under the Home Flipping Tax Act and any profit gained from its sale may be taxable.

4. Net taxable income from short-term sales

The Home Flipping Tax Act defines “net taxable income” as the person’s taxable income minus the “primary residence deduction,” if applicable.¹⁰ The primary residence deduction reduces net taxable income from a taxable transaction if: (a) the property is owned for a minimum of 365 consecutive days and (b) the property includes a housing unit that was the taxpayer’s “primary residence” (defined to mean the place in which an individual resides longer than any other place) during the period in which the seller owned the property. “Taxable income” is determined by the following formula:

Proceeds from the sale of the taxable property – (Acquisition cost of the property + Cost of improvement to the residential property)¹¹

5. Exemptions and deductions

Our previous insight canvassed a range of exemptions available under the Home Flipping Tax Act, including those for certain life circumstances, such as divorce, illness and job loss, as well as for specific entities, such as registered charities, Indigenous nations and cooperative associations (the Exempt Entities).¹²

A notable exemption under the Home Flipping Tax Act applies to builders and developers (the Builders’ and Developers’ Exemption). The Builders’ and Developers’ Exemption applies in respect of a disposition of residential property where: (a) the builder’s or developer’s ordinary course of business involves the buying and selling of property for the purpose of constructing or placing buildings on the property and the constructing or placing buildings on the property held for that purpose; and (b) the taxable property was held for the purpose of constructing or placing buildings on the property.¹³ However, even if a developer or builder qualifies for the Builder’s and Developers’ Exemption, they are still required to file a tax return under the Home Flipping Tax Act.¹⁴

The Home Flipping Tax Act includes also an exemption for dispositions between related persons, including related individuals (such as blood relatives or spouses) and corporations (the Related Person Exemption). This is significant for clients who are reorganizing ownership of residential properties, including carrying out assignments of contracts of purchase and sale in respect of residential properties. Related persons include: (a) corporations and the person or group of persons who control the corporation, (b) two corporations controlled by the same person or group of persons, and (c) a new corporation and any predecessor corporations, if the new corporation was formed as a result of an amalgamation of the predecessors. A tax return must still be filed to claim the Related Person Exemption.¹⁵ Although the Related Person Exemption does not extend explicitly to partnership structures, the Home Flipping Tax Act does consider these structures in the context of other exemptions, such as the Builders’ and Developers’ Exemption and in respect of Exempt Entities. In the context of the Builders’ and Developers’ Exemption, a partner in a partnership is considered to be related to the partnership and the definition of related persons is modified accordingly. Additionally, a partnership is exempt from tax if all partners are exempt persons.

There is also an exemption under the Home Flipping Tax Act for sellers who dispose of a pre-sale contract under specific conditions. This exemption applies only where: (a) at the time the pre-sale contract was signed, it was intended that a housing unit was to be constructed or placed on the residential property; (b) during the time the seller held the taxable property, they received an estimated completion date that was more than 365 days after the original estimated completion date set out in the pre-sale contract; and (c) both estimated completion dates were provided in writing by a person who ordinarily undertakes the buying and selling of property for the purpose of constructing or placing buildings on the property, and the constructing or placing buildings on property held for the same purpose (the Pre-Sale Delay Exemption).

Additionally, under the Home Flipping Tax Act, a person is exempt from tax if their disposition of the taxable property is due to a foreclosure, either through exercise of a power of sale by the registered owner of a charge on the residential property or by a court order for the sale of the property.

6. Tax returns, enforcement and penalties

Sellers making taxable dispositions under the Home Flipping Tax Act must file a separate tax return for each taxable transaction.¹⁶ This tax return must be filed within ninety (90) days of the date the taxable transaction occurred.¹⁷ Offences under the Home Flipping Tax Act include making false or deceptive statements in a tax return, wilfully evading or attempting to evade the payment of tax and destroying or altering a record to evade payment.¹⁸ With respect to offences related to tax evasion, the Home Flipping Tax Act imposes fines ranging from 50% to 200% of the tax sought to be evaded, imprisonment for up to two years or both.¹⁹

7. Practical implications

The Home Flipping Tax Act introduces new tax consequences and filing requirements for those disposing of residential property in BC within 730 days of acquisition. The government has not yet released the regulations under the legislation, which could provide further clarification of the administration and enforcement details under the Home Flipping Tax Act.

Developers, builders and businesses may be impacted by market changes resulting from this new tax and should consider the impact of the Home Flipping Tax Act when disposing of residential property held for redevelopment purposes, whether that disposition occurs by way of contract or assignment of contract. Businesses holding residential property in partnerships that do not typically engage in development activities should exercise caution when reorganizing those partnerships. Certain reorganizations, particularly those involving trusts, may unintentionally disqualify them from the Related Persons Exemption and trigger the short-term profit tax.

Importantly, the Home Flipping Tax Act provides an exemption for builders and developers who meet specific criteria. However, even if builders and developers qualify for this exemption, they are still required to file a tax return for any taxable transactions that occur within the 730-day period. Builders, developers, and other individuals must ensure full compliance with the legislation to avoid significant penalties.

This Insight is for general information only and is not intended to be legal advice. This is a general summary only and the application of law will depend on unique circumstances in every case. Laws and regulations described herein may have been modified since the date of this Insight. For more information, please contact the authors, Brigham Jagger, Joel Nitikman, KC, Inder Biring or Emily LeDue or a member of Dentons’ Tax or Real Estate groups.

1. Bill 15, Budget Measures Implementation (Residential Property (Short-Term Holding) Profit Tax) Act, 2024, 5th Sess, 42nd Leg, British Columbia, 2024 (assented to 25 April 2024) [Home Flipping Tax Act].↩
2. Brigham Jagger, Inder Biring and Emily LeDue, “British Columbia’s home flipping tax: Overview and implications”, Dentons (16 May 2024), https://www.dentons.com/en/insights/articles/2024/may/16/british-columbias-home-flipping-tax-overview-and-implications#_ftn2 [“Dentons May 2024 Insight”].↩
3. Home Flipping Tax Act, s. 9(1)(a).↩
4. Id., s. 9(1)(b).↩
5. Ibid.↩
6. Ibid.↩
7. Ibid.↩
8. Government of British Columbia, “BC home flipping tax” (3 April 2024), online: https://www2.gov.bc.ca/gov/content/taxes/income-taxes/bc-home-flipping-tax. For a more in depth discussion of how the new legislation applies to pre-sales, see the Dentons May 2024 Insight, supra note 2.↩
9. Home Flipping Tax Act, s. 1.↩
10. Ibid, ss. 11-12.↩
11. Ibid, s. 13. ↩
12. May 2024 Dentons Insight, supra note 2.↩
13. Home Flipping Tax Act, s. 22.↩
14. Section 22 (the Builder’s and Developers Exemption) is not one of the listed filing exemptions under s. 35 of the Home Flipping Tax Act. Home Flipping Tax Act, s. 28.↩
15. Home Flipping Tax Act, s. 28.↩
16. Ibid, s. 31.↩
17. Ibid.↩
18. Ibid, s. 95.↩
19. Ibid.↩