Recap: Federal, BC and Vancouver residential real estate vacancy tax initiatives

July 13, 2022

On June 9, 2022, Bill C-8 received Royal Assent in Parliament, making the new Federal Underused Housing Tax (UHT) effective as of January 1, 2022. The UHT looks to address housing affordability by imposing a tax on vacant or under used Canadian residential real estate directly or indirectly owned by non-residents in urban areas across Canada.

Even if UHT is not owing, Canadian private corporations, partnerships and trusts owning Canadian residential real estate may still need to file a UHT return. More details to follow once the Regulations to the UHT Act are released for prescribed geographical areas and uses not caught by the new UHT.

See our summary below for some important UHT features to keep in mind, as well as other federal, provincial and Vancouver-specific tax initiatives, including BC’s Speculation and Vacancy Tax and City of Vancouver’s Empty Homes Tax.

Federal Underused Housing Tax (UHT) — Effective January 1, 2022

The federal UHT is a 1% tax of the value of vacant or underused Canadian residential property owned on December 31. The taxed value is the greater of: the assessed value for property tax, or the most recent sale price on or before December 31.

All legal title owners, whether individuals, corporations, partnerships or trusts; life tenant, long term or life lease holder, of Canadian residential property will be required to file a return by April 30 of the following year, unless considered an “excluded owner.” Excluded owners are Canadian citizens, permanent residents, trusts of a mutual fund trust or REIT, public corporations (but not private corporations) and others to be defined by the Regulations (not yet issued). The first filing deadline will be April 30, 2023 and there will be penalties, interest, etc. if UHT is payable. Penalties for not filing are $5,000 for individuals and $10,000 for others. More details will likely be provided in the Regulations to this new UHT Act.

The tax could be zero if an exemption applies. Exemptions include, but are not limited to:

  1. Canadian corporations with foreign owners with shares with less than 10% of the votes or value (“specified Canadian corporation”), and other exemptions for partnerships and trusts whose members or beneficiaries are “excluded owners” or “specified Canadian corporations”;
  2. property that is the owner’s primary place of residence; and
  3. property with a qualifying occupancy period of at least 180 days in the calendar year.

Keep in mind—private corporations, partnerships and trusts that could be exempt from the tax are not exempt from filing the return.

The tax is designed to be similar to BC’s Speculation and Vacancy Tax, with similar exemptions; however, we are awaiting more details upon the release of the Regulations. The tax should not apply if both in a prescribed area and if prescribed conditions are met (to be confirmed), which is meant to exclude most vacation or recreational property not in an urban area that is used at least four weeks every calendar year by the owner or spouse/common law partner.

Even if UHT is not owing, Canadian private corporations, partnerships and trusts owning Canadian residential real estate may still need to file a UHT return. More details to follow once the Regulations to the UHT Act are released for prescribed geographical areas and uses not caught by the new UHT.

Other tax Federal initiatives effective in 2022 and 2023 include:

  • Increase of the First-Time Home Buyer’s Tax Credit — Effective January 1, 2022
    • Increases the First-Time Home Buyer’s Tax Credit from $1,000 to $1,500 for eligible first-time home buyers.
  • Taxation of residential assignment sales — Effective May 7, 2022
    • Makes all residential assignment sales subject to GST/HST.
  • Introduction of the new Tax-Free First Home Savings Account (FHSA) — Effective TBD, 2023
  • Introduction of a Multigenerational Home Renovation Tax Credit — Effective January 1, 2023
  • New taxation rule on ‘flipping’ of residential real estate — Effective January 1, 2023
  • New 2 year ban on foreign ownership of non-recreational residential property Effective TBD

For information on other Federal Tax initiatives announced in 2022, read our 2022 Federal Budget Highlights article.

BC Speculation and Vacancy Tax

BC’s Speculation and Vacancy Tax is a tax of 0.5% or 2% for foreign owners and satellite families of a BC residential property’s assessed value. An annual declaration is due March 31 each year, and all owners must declare. There are exemptions—a full list of which can be found on the Government of BC website.

City of Vancouver Empty Homes Tax

City of Vancouver’s Empty Homes Tax is a tax of 5% of Vancouver residential property’s assessed value (was 3% for 2021). An annual declaration is due the second business day of February each year. There are exemptions—a full list of which can be found on the City of Vancouver website. Visit the Real Estate Board of Greater Vancouver website for additional information.

Contact your DMCL advisor regarding the federal, provincial or municipal taxes that may apply to you and they’ll be happy to help you understand your options and design a plan that keeps more money in your pocket.