British Columbia small business owners balk at unexpected property tax change

“You have to sell a lot more to pay a little more overhead.” — Murray Fraser, a business owner faced with an increase of more than $15,000 in property taxes.

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Murray Fraser got his first snowboard at a ski show in Las Vegas and learned to snowboard at the Cypress Bowl in 1986. He opened one of the first specialty snowboard shops in Vancouver the following year and then moved into a 5,000 square foot location on Fourth Street.

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The Boardroom, which sells snowboard, skate, wake and surf gear, has grown over the decades and faced property tax increases, but nothing quite like it.

He is one of a set of businesses in Victoria, Vancouver and elsewhere that are unexpectedly – ​​and without consultation – losing their ability to claim airspace property tax relief, which is the right to build in the vertical space above a property.

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That’s a difference that will mean a 35% increase in Fraser’s property taxes, from $45,745 in 2021 to $61,634 in 2022, an increase of $15,889.

“My business isn’t going to shut down based on an extra cost of $15,000, but it’s getting harder and harder,” Fraser said.

Increases in the minimum wage and Medicare payments further squeezed margins.

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“People might think, ‘Just spread that amount over 12 months, but if you have a 5% profit margin, then you have to sell about $300,000 more’, to pay that extra $15,000 in property taxes.

“You have to sell a lot more to pay a little more overhead.”

The provincial government is offering affected properties a one-year vacation only on the school tax they pay.

But it’s some comfort in exchange for losing what Ryan Tung, director of property tax at global tax firm Ryan LLC, describes as “some equity” for these businesses in recent years.

Since around 2017, some commercial property owners in Vancouver, seeking to reduce property taxes, which are typically paid by their tenants, have gone to court for what are called “split assessments”.

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This essentially means that potential condos yet to be built in the airspace above a property are taxed at the lower residential rate. It is instead that entire property, including currently empty airspace, be taxed at a higher commercial level.

“In all of these companies, the leases are triple net leases, with the company (landlords) paying taxes,” in addition to rent and maintenance costs, Tung said.

“So there was a nice relief to be able to get about 40% of the total amount (classified) as residential, with that (part of the bill) down three times” in cost, and reducing the total amount significantly.

Tung said the latest change comes after two cases before the Assessment Appeal Board in the last year and a half.

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They each issued judgments that signaled disagreement with a landmark Supreme Court decision in 2016 that paved the way for this “split assessment” that businesses use to help lower their property tax bills.

“It’s a major change,” Tung said.

“The main problem we have with all of this is that it is a radical change and, given all the labor and all the litigation that has occurred on this issue during the last decade, it would have been nice to have some level of consultation with BC Assessment.”

BC Assessment sent an email with the change on November 26

Tung is a member of the Business Tax Alliance, a new advocacy group representing over 10,000 business taxpayers in Victoria, Vancouver and Surrey.

“The other thing is (with more consultation) we could have made landowners aware that it could happen and people can plan ahead. People budget for taxes long before. Now you have businesses left behind.

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Penny D. Jackson