In 2018, a new law on taxing short-term rentals came into effect in British Columbia and has had serious impacts on businesses like Airbnb. This blog post is dedicated to answering the most commonly asked questions about paying taxes for these kinds of rental accommodation services – particularly ones located in BC.
Understanding the Impact of Short-term Rental Taxes in Vancouver – How They Affect Your Business and Wallet
What is Municipal & Regional District Tax in BC?
The Municipal and Regional District Tax (MRDT) is a type of tax that applies to short-term accommodation units for rent such as vacation rentals located in Vancouver, and other participating areas of British Columbia, on behalf of the municipalities, regional districts, and eligible entities.
Commonly referred to as a ‘bed tax’, the MRDT is intended to help fund tourism-related activities in the city, such as local attractions, festivals, events, and cultural programs. Whistler Mayor Nancy Wilhelm-Morden has expressed that the intention of the Provincial Sales Tax (PST and Municipal & Regional District Tax was to make it fairer for all businesses.
According to the law, the MRDT in the town of Whistler, outside of Vancouver is listed at 2%, while the entire province under the Provincial Sales Tax (PST) is 8%.
Explaining the Impact of Provincial Sales Tax (PST) & The MRDT on Short-term Rentals in British Columbia
The Municipal and Regional District Tax (MRDT) is an important part of the short-term rental tax laws in British-Columbia, and accounting for it can prove to be tricky due to the varying rates across municipalities. Understanding this law can help owners ensure they’re compliant with taxation regulations for their short-term rental business.
In certain municipalities and regional districts of BC, the Municipal and Regional District Tax (MRDT) can range up to a whopping 3% for overnight accommodation. This is an additional 3% that travellers should consider when budgeting if they intend to travel to or book Airbnb listings in certain municipalities in BC.
Passed in 1987, the Municipal and Regional District Tax (MRDT) not only is a revenue generator that helps fund local tourism but it’s also part of regulating short-term rentals. The tax law has expanded this to include housing rentals like vacation homes or apartments as part of the Provincial Sales Tax (PST). This PST applies to many goods within BC such as cars, software products, communication services, and so on. Overnight camping and RV booking sites are exempt from PST and MRDT.
Matthew Hick of alluraDirect has previously expressed concerns about the new taxes. If his business or Airbnb were to be a middle party between the government and a short-term rental owner, the law would seem almost moot.
Are There Exemptions to the MRDT?
For homeowners who are looking to avoid paying this tax, there are some exemptions available.
Firstly, Homeowners who provide short-term rental services directly could possibly escape through a loophole, since the law does exempt any place that is not online, makes less than $2500 in total revenue, and is not projected to gross more than that.
A second exemption is if the unit surpasses four weeks consecutively. The onus is on the short-term rental owner to show evidence of their rental arrangement before taxes can be waived if they’d like to be exempted. For those who use middle party services, that job lies only to those middle parties who have to confirm that what is on their website is verified as a rented property.
Should Short-Term Rentals Unit Be Licensed?
Operating a short-term rental unit in BC requires more than simply offering accommodation. It is essential that you adhere to the short-term rental regulations and taxes put in place by the provincial government. This includes obtaining a license for your short-term rental.
The Resort Municipality of Whistler has started to require all rentals that are used for short-term accommodation in certain zones to be licensed. Mayor Wilhelm-Morden said the provincial government rather than the local government are the ones responsible for ensuring that all tax laws are being followed.
The Municipal & Regional District Tax varies by town, so others may be higher or a bit lower than what Whistler has. All homes used for short-term rental services need to be verified and should be as legitimate to avoid legal issues.
Because of a growing tourist economy in British Columbia, like in Victoria, the provincial government is taking advantage of the new revenue to upgrade all public facilities and infrastructure for modern standards into the new decade.
If you have more questions about MRDT Tax Return, you can click on this article to learn more.
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