Pre-sale contracts

How the BC home flipping tax applies to pre-sale contracts

The BC home flipping tax applies to the profit you earn from selling a presale contract in British Columbia if the sale occurred less than 730 days after you entered into the contract.

The tax is imposed under the Residential Property (Short-Term Holding) Profit Tax Act, which takes effect starting January 1, 2025.

Presale contracts that you purchased or are assigned to you before the tax’s effective date may be subject to the tax if sold on or after January 1, 2025 and owned for less than 730 days, unless an exemption applies.

Who is subject to the tax?

If a person (which can include an individual, corporation, partnership or trust) sells or disposes of a taxable property on or after January 1, 2025, the profit earned from the sale would be subject to the new tax if the property was purchased less than 730 days before the sale. The seller of the property may be a B.C. resident or a resident anywhere else in the world.

Taxable properties

A taxable property includes the right to acquire a beneficial interest in residential property. A presale contract is considered a right to acquire a beneficial interest in a residential property. 

The tax will not apply to exempt property locations.

How the tax is calculated

The BC home flipping tax applies to net taxable income from the sale of a presale contract that was owned for less than 730 days.

The tax rate is 20% of net taxable income earned from a presale contract sold within 365 days, and the rate decreases over the next 365 days. At 730 days, the tax no longer applies.

A person is not eligible for the primary residence deduction in calculating net taxable income from the sale of presale contract.

Calculate your BC home flipping tax in 4 steps

• Step 1: Calculate your taxable income
• Step 2: Calculate your net taxable income
• Step 3: Calculate your tax rate
• Step 4: Calculate your tax owing

Step 1: Calculate your taxable income on the sale of the presale contract

Unlike the sale of a residential property, taxable income from the sale of a presale contract does not include a deduction for cost to improve the property and is calculated as:

• Proceeds from the sale of the property minus cost to purchase the property

Step 2: Calculate your net taxable income

Since presale contracts are not eligible for the primary residence deduction, your net taxable income will equal your taxable income as calculated under Step 1.

Your net taxable income cannot be a negative amount. A calculation of net taxable income that results in a negative amount is deemed to be zero.

Step 3: Calculate your tax rate

The tax rate for the sale of a presale contract is the same as the tax rate for the sale of residential property.

If you own the property for less than 366 days, the tax rate is 20% (the amount of the tax rate is rounded to the nearest one-thousandth).

If you own the property for more than 365 days and less than 730 days, the tax rate is reduced until it reaches zero according to the following formula: 

• Tax rate = 20% × [ 1 - ( (Days held - 365) / 365) ]

If you own the property for more than 729 days, you are not subject to the BC home flipping tax.

Step 4: Calculate your tax owing

Your tax owing is:

• Your tax rate from Step 3 multiplied by your net taxable income from Step 2

Days of ownership for pre-sale contracts

The day you purchase a presale contract is generally the date you pay for the contract, which is also the date 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.

Exemptions that apply to pre-sale contracts

Find out about exemptions from the BC home flipping tax that may apply to pre-sale contracts, including if the estimated completion date on your pre-sale contract is delayed by more than 365 days.

Presale contracts do not qualify for the exemptions for builders, developers, building or renovating activity or for exclusive use for a commercial purpose.

Do I need to file a BC home flipping tax return

The BC home flipping tax return is separate and distinct from the annual income tax filings.

You must file a BC home flipping tax return within 90 days of the sale, if either of the following applies:

• You qualify for the tax, as you sold your property within 729 days of purchasing it and are not eligible for any exemptions
• Your exemption applies only after you file a return

You do not have to file a return if one of the following applies:

• You do not qualify for the tax as you sold your property after owning it for more than 729 days
• Your exemption applies without needing to file a return
• You are a developer and you are initially entering into an agreement which establishes a right to acquire a property (for example, when a developer enters into a presale agreement with an initial purchaser)