Just when you think you couldn’t be taxed any more, another tax gets thrown at you. No need to worry if you don’t live in Ottawa or Toronto, but if you do live in these two areas then you may be impacted by the new Underused Housing Tax, also known as the Vacant Home Tax (“VHT”).
What is the Vacant Home Tax
The coronavirus pandemic shook up the housing market with profound impacts on the housing market. House prices have risen at record levels, hitting a peak in July, 2021.
The VHT was implemented in 2022 to try to not only alleviate the pressure of the “hot” real estate market, but also to encourage homeowners to maintain, occupy or rent their own properties. The VHT only applies to vacant/not used residential homes in Ottawa and Toronto that are left vacant for more than 184 days during the previous calendar year. The tax rate is calculated at 1% of the property’s current assessed value.
How to declare the status of your home
Each year, homeowners will be required to register the status of their home for the previous year. If the homeowner does not declare the status of their home, the home will be deemed vacant and will be subject to the 1% tax. For clarity, every homeowner will need to provide their declaration regardless if their home is vacant or not.
The homeowner can provide their declaration online on the City’s website or request a hard copy form from the City.
Penalty for not declaring
If the homeowner does not register the status of their home by the City’s deadline, a fine of $250 may be issued. False property status declarations, or failure to provide information may result in fines of up to $10,000 in addition to the 1% VHT payment.
Exemptions
A property may be exempt from the VHT for certain circumstances, if left vacant for at least 184 days. For example, a home can be exempt in the case of the death of the homeowner, if the homeowner is in a long-term care facility or a vacation property that is located in an eligible area of Canada. If the property falls within one of the exemptions, the homeowner will be required to provide evidence to deem it exempted. A list of all exemptions can be found on the CRA’s website under Excise and Specialty Taxes.
Change of home ownership
It is important to know that there are implications for house sales for both the seller and the purchaser. The purchaser and the seller are both responsible to ensure that the declaration has been submitted to the City. The VHT will form a lien on the property for any unpaid taxes which will become the purchaser’s responsibility. The purchaser should request that the seller provide a copy of the submitted property status declaration prior to the closing date and the seller should also provide a statutory declaration as part of the closing documentation confirming that the submitted property status declaration is true and correct.
Appeal
If the homeowner disagrees with the City’s decision to deem their home vacant, the homeowner can submit an appeal request. Each City has their own appeal process and the appeal process can be found on the City’s websites.
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This WARDS LAWYERS PC publication is for general information only. It is not legal advice, nor is it intended to be. Specific or more information may be necessary before advice could be provided for your particular circumstances.
