Over the previous couple of months, the Underused Housing Tax Act (the “Act”) has moved by way of the Home of Commons and is presently within the closing steps of the report stage. If the Act is finally introduced into drive, it is going to implement an annual tax of 1% on the vacant or underused residential actual property, straight or not directly owned by non-Canadians.
Whom does the Underused Housing Tax (UHT) goal?
The UHT works on an exclusionary foundation. If an individual doesn’t match into one of many classes of an “excluded proprietor” then they’re topic to the tax. Most non-citizens and non-permanent residents that personal residential property in Canada, no matter how that property is held straight or by way of an organization, belief or partnership[1], is not going to meet the factors of an excluded proprietor and thus can be topic to the tax.
What’s the tax system?
People should calculate and submit a return to the Minister, payable on or earlier than April 30th of the 12 months. The UHT is the same as 1% of the assessed or truthful market worth of the residential property.[2] Non-excluded homeowners are required to file a return by April 30th of every 12 months for the prior calendar 12 months for every residential property that they personal and make the required fee by April 30.
What constitutes an underused house?
The UHT solely applies to residential property as outlined within the Act.
The Act excludes from the qualifying occupancy interval conditions the place the one people having steady occupancy of a dwelling unit are the proprietor or a partner, common-law associate, guardian or baby of the proprietor, if every of these people reside or lodges at a spot aside from the residential property for an equal or better variety of days than they reside or lodge on the residential property.[3]
What exceptions can be found for non-excluded homeowners?
The Act contemplates a number of exceptions. The most typical exception is property that’s the major place of residence of the person, partner or widespread legislation associate.
Some notable conditions the place the UHT will not be payable embrace:
- The residential property will not be appropriate for year-round use as a spot of residence;
- The residential property is seasonally inaccessible as a result of public entry will not be maintained year-round;
- The residential property is uninhabitable for a interval of at the least 60 consecutive days within the calendar 12 months on account of catastrophe or hazardous situations;
- The residential property is uninhabitable for a interval of 120 consecutive days on account of renovation to the residential property and the work is carried on with out unreasonable delay, and this exception didn’t beforehand apply inside the final 9 prior calendar years;
- The particular person turns into an proprietor of the residential property within the calendar 12 months and was by no means an proprietor of the residential property within the 9 prior years;
- The particular person died in the course of the calendar 12 months or prior calendar 12 months;
- The particular person is the non-public consultant in respect of a deceased particular person who was an proprietor of the residential property in the course of the calendar 12 months or the prior calendar 12 months and was not in any other case an proprietor in both of these years;
- The development of the residential property will not be considerably accomplished earlier than April of the calendar 12 months;
- The development of the property is considerably accomplished after March of the calendar 12 months, the property is obtainable on the market to the general public in the course of the calendar 12 months and the residential property has by no means been occupied by a person as a spot of residence or lodging in the course of the calendar 12 months;
Enforcement
The Act accommodates a complete administrative and enforcement scheme that makes use of lots of the similar devices utilized within the Earnings Tax Act (the “ITA”), corresponding to Normal Anti-Avoidance Guidelines, evaluation and objection procedures, in addition to statutory rights of enchantment.
How will the UHT apply concurrently with B.C.’s Hypothesis and Emptiness Tax and Vancouver’s Empty Properties Tax?
In comparison with B.C.’s Hypothesis and Emptiness Tax (the “SVT”) and the Vancouver Empty Properties Tax (“EHT”), the ambit of the UHT is narrower and applies solely to non-Canadians.
Non-Canadian homeowners in B.C. which are presently topic to the SVT and/or the EHT ought to plan and put together for a further 1% tax, in addition to the extra administrative efforts that include calculating, declaring and submitting this quantity annually.
[1] See definition of “specified Canadian company”.
[2] See 6(3)
[3] See part 6(2)