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[BUYING AND SELLING REAL ESTATE IN CANADA - ONTARIO]
own residential property in Canada on December 31 of a calendar year, and which property is vacant or "underused" – to file an annual tax return and pay a tax of 1% of a residential property’s value (the “ UHT ”), annually. Under the UHT legislation, a residential property includes detached, semidetached, townhomes and similar separate residential dwellings. Generally, a residential property is considered underused if it is not continuously occupied for 180 days or more in a calendar year. Exemptions can include vacation property in rural areas held for personal use for a minimum of 4 weeks/year, and not suitable or accessible for year-round occupancy; property uninhabitable due to disaster or hazardous conditions; property undergoing major renovations; property held in the year of death; or property acquired during the calendar year. On June 20, 2024, proposed amendments to the Underused Housing Tax Act came into force. In particular and of note: • specified Canadian partnerships, trusts, and corporations will be considered “excluded owners,” for the purposes of UHT. Consequently, these taxpayers will be exempted from filing UHT returns for the 2023 calendar year onwards. • the “vacation property” exemption is limited to only one residential property for a calendar year, effective for 2024 onward. • unitized (condominiumized) apartment buildings are excluded from the definition of “residential property”, and therefore exempt from UHT, effective for 2022 and subsequent years.
XVIII. VACANT HOME TAX (TORONTO, OTTAWA & VANCOUVER) Toronto and Ottawa introduced new vacant home taxes which began to take effect in January 2023, and which developed after the empty homes tax regime implemented in Vancouver in 2017. Unlike the federal Underused Housing Tax Act , the vacant home tax payments are not limited to owners who are non-citizens or non- permanent residents of Canada, but rather apply to all owners of residential properties in Toronto and Ottawa. In Toronto, the Vacant Home Tax (VHT) is an annual tax that will be imposed on vacant Toronto residences. A property will be considered vacant if it was not used as the principal residence by the owner(s) or any permitted occupant(s), or if it was not occupied by tenants for a total of 6 months or more during the previous calendar year. Similarly in Ottawa, there is a Vacant Unit Tax (VUT) which applies to non-principal residences vacant in 2022 for at least 184 days. A unit will be considered vacant if it was not used as a principal residence and has been unoccupied for more than 184 days in the previous calendar year. Notably, the tax applies only to properties in the residential tax class – excluding commercial, industrial, and multi-residential properties. Effective January 1, 2024, Toronto announced that it would increase the VUT to 3 percent per year – from 1 percent. For example, the owner of a $2 million property that is determined to be vacant for more than six months during the previous year would be required to pay $60,000 under the increased VUT, unless the property qualifies for an exemption Possible exemptions include: the death of a registered owner, repairs or renovations, principal resident is in care,
ILN Real Estate Group – Buying and Selling Real Estate Series
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