Canada has multiple taxing systems for underused or vacant homes on both municipal and federal levels. These taxes are mainly designed to keep foreign buyers from holding unoccupied investment properties or occasional dwellings. Canada reinforced a federal tax (The Underused Housing Tax) on vacant homes in January 2022. Some cities have their own separate taxes for vacant or unoccupied residences. Vancouver was the first Canadian city to impose a vacant home tax in 2017. The tax followed a reported 7.1% in vacant dwellings, causing concerns about housing shortages and the effects of underused properties on Canadian buying and rental markets.
The Underused Housing Tax Act (UHTA) is an annual 1% tax on the ownership of vacant or unused housing. This is a Canadawide tax, so it’s applicable across the country. The UHTA mainly applies to non-resident owners.
With some exceptions, the following parties are required to pay a Canadian federal vacant home tax:
Most Canadian permanent residents or citizens are not subject to the UHTA. Circumstances which may be exempt from paying the UHTA are as follows:
If you’re an owner required to pay the vacant home tax federally or municipally, you’ll need to file an Underused Housing Tax return for each residential property you owned in the previous tax year. You can file your underused housing tax electronically. Your financial advisor can help you process the return, establish how much you owe and determine whether you qualify for an exemption. If you’re exempt, you still need to file the return to demonstrate how. You’re also legally required to keep proof of exemption and be prepared to show it if asked. If you can’t demonstrate why you’re exempt, you may still be subject to charges. If you fail to pay this return when it’s due, you can be charged $5,000 as an individual or $10,000 as a corporation.
In some cities you may need to pay a municipal vacancy tax as well as the 1% federally mandated UHTA tax.
The following areas have municipal vacancy taxes in addition to federal vacancy tax:
British Columbia recently introduced the speculation and vacancy home tax in response to a housing shortage crisis across the province. This tax is separate from Vancouver’s empty homes tax and the Government of Canada’s Underused Housing Tax. You can find the full list of taxable regions to see if this tax applies to you. In some cities, British Columbia residents won’t have to declare speculation and vacancy home taxes until 2024.
This article offers general information only and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While the information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or its affiliates.
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