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In order to cool down overheated housing markets in certain cities, various governments have added new taxes to homes that are not occupied, rented out or fully utilized.  Many think that these measures only affect those who own investment properties, or are foreign buyers.  This misunderstanding could mean a hefty fine for some who own only their primary residence as well.

Vacant properties are those that have been unoccupied for more than six months during the tax year (Jan 1 – Dec 31). Most importantly, failure to make a property status declaration will result in a property being deemed vacant and therefore subject to the Empty Homes Tax.  Even if the property is your primary residence, you still have to declare it.   We hate to be the bearer of the bad news: unfortunately, your declaration period has passed for 2022.   

For Vancouver homeowners, properties deemed or declared empty in 2022 will be subject to a tax of 3%; for in 2023, it will increase to 5%.    Late and unpaid Empty/Vacant Homes Taxes are subject to the same penalties for non-payment as property taxes, including:

• A late payment penalty of 5%
• Daily interest on arrears
• The tax sale process

Moreover, the BC provincial government also has a Speculation and Vacancy Tax (SVT), for which the requirement for declaration will start in 2024.  Areas being subjected to this new tax include:   

Capital Regional District (CRD)

Metro Vancouver Regional District

City of Abbotsford

District of Mission

City of Chilliwack

City of Kelowna

City of West Kelowna

City of Nanaimo

District of Lantzville

For Toronto homeowners, the tax rate is 1%; there is also a later declaration or false declaration penalty of $250 to $10,000.   Interest on any overdue Vacant Home Tax is 1.25 per cent on the first day of default and each month thereafter, until the amount owed is paid.

It does not stop there: Starting last year in 2022, the Federal government's Underused Home Tax (UHT) was added at an annual 1% tax on the ownership of vacant or underused housing in Canada. 

The good new is that there is an "excluded owners" category that most Canadians fall into: citizens, permanent residents, listed corporations, REITs and charities, who own primary residences or a vacation home located in an eligible area etc. do not have to file a UHT return. 

What if I own the properties through a trust, a private corporation or a partnership? 

Even if you owe no taxes under these structures, you still must file a UHT return.  The penalties for filing after the April 30 deadline (May 1, 2023, for the 2022 tax year) are much stiffer than the municipal governments': Minimum $5,000 for individuals, and $10,000 for corporations, for each residential property.  The penalties would be higher with no cap on the maximum! 

The most commonly seen small-business corporations are "numbered companies" owned by multiple property owners, and the many farms in Canada that are held in corporate or partnership structures.  For example, each farm that has a house on it will have to file the UHT return or they could potentially owe a $10,000 penalty.  There are many other exceptions and stipulations that one should consult their accountant for more details.

Insurance Kit could help with tax-saving strategies through insurance products.  To understand how insurance products could help your tax-planning in this regard, contact us now!

Related links:

Federal government's Underused Housing Tax (UHT)

BC government's Speculation and Vacancy Tax (SVT)

City of Vancouver's Empty Home Tax (EHT)

City of Toronto's Vacant Home Tax (VHT)

*Information provided here is based on Investment Executive's February article.  Insurance Kit and those associated with the information on this website are not professional accountants, unless specified otherwise. Please always seek the advice of a professional accountant prior to making any tax related decisions.