Vancouver’s Tax Structure

The DVBIA is working with Vancouver City Council to shift 2 per cent of the tax burden from commercial to residential properties in 2019. We caught up with Ed Furlan, Senior Director at Altus Group, to get his thoughts about the current tax situation for small businesses in Vancouver.

What is the current tax structure for businesses in Vancouver?

Each year, mill rates for different property classes are set out to calculate the property tax based on taxable values. For property classified under Business & Other (Class 6), the 2018 mill rate is 10.85419; therefore property tax levy is $10.85419 per $1,000 taxable value. Among the mill rate 10.85419, 5.03019 goes to General Purpose Tax Levy, 4.56143 goes to Provincial School Tax, 1.02059 goes to Translink, and the remaining goes to BC Assessment Authority, Greater Vancouver Regional District, and Municipal Finance Authority. In addition, there may be utility and BIA levies to specific properties and areas.  The assessed values are based on an annual market value system.

Are there any measures that could help relieve this tax burden?

The best way to ensure that property owner is paying fair tax amount on their property is to have their property assessment regularly reviewed by a professional property tax consultant. Although the industry is small, many individuals could complete this type of mandate. I would also encourage owners/property managers/tenants to communicate with the city assessors before they finalize the assessment roll each year. They would be more receptive to change and tax savings (versus appealing the assessments)

Would a 2% shift in taxation make much of an impact on small business operations?

A 2% shift in taxation will have an impact on small business operation. The shift savings can be quantified to each individually rented/owned unit. This is done on the recovery of property taxes on their triple net (NNN) leases. Additional as in the past, the 2% shift will be mean savings move forward indefinitely.   Businesses are still benefitting from previous tax shifts of years past. Every dollar helps.

Do you have any advice for someone thinking of starting a small business downtown?

Property tax is the most significant expense component in a triple net lease (most of the city is on NNN leases).  Furthermore, these taxes are passed to tenants for the life of their leases. While the base rent is generally fixed and known from day one, the operating costs are variable. They change from year to year. In locations of changing use (think Cambie Street or Main Street) the taxes could surpass the amount of base rent being paid. Before signing any lease, small business owners should try to understand the full extent of their lease obligations and specifically how the operating costs/taxes will impact their bottom line.