Blog Alert – Vacancy Tax Update
Over the last few years, various levels of governments have enacted new taxes attempting to address the housing affordability crises. Our past blogs have addressed these taxes:
2019 Blog – BC Speculation and Vacancy Tax
January & March 2023 Blog – Canadian Federal Vacancy Tax and Update
November 2023 has seen more tax changes and updates:
Federal Underused Housing Tax (“UHT”)
On October 31, 2023, hours before the first filing deadline, Canada Revenue Agency announced a further extension for filing of UHT returns and payment of the tax for the 2022 year to April 30, 2024. A few weeks later, in its 2023 Fall Economic Statement, the Canadian Federal Government proposed changes to the legislation, including:
- Revising the definition of “excluded owner” to now include certain Canadian specified corporations, partnership and trusts. Excluded Owners are not subject to UHT and are not required to file UHT returns;
- Clarifying that buildings containing more than three units that are unitized or subdivided are not “residential property” and consequently not subject to UHT tax or filing;
- Reducing the penalties for failure to file UHT returns from $5,000 for individuals ($10,000 for corporations) to $1,000 for individuals ($2,000 for corporations);
- Other changes including exemptions for certain employee accommodations and clarifying claims for vacation property exemptions.
The proposed changes were in response to feedback from Canadians concerned the UHT filing requirements on Canadian owners were not clearly understood and were not consistent with the original purpose of the UHT legislation to address concerns over foreign ownership of Canadian residential property.
Further details the proposed changes are at the link below (See section entitled Underused Housing Tax)
https://www.budget.canada.ca/fes-eea/2023/report-rapport/tm-mf-en.html#a31
British Columbia Speculation and Vacancy Tax (“SVT”)
On November 21, 2023, the BC Government announced an expansion of SVT to thirteen (13) more municipalities. Starting January 1, 2024, eight municipalities in the BC interior and five on Vancouver Island will be subject to SVT:
BC Interior: Vernon, Coldstream, Penticton, Summerland, Lake Country, Peachland, Salmon Arm, and Kamloops
Vancouver Island: Courtenay, Comox, Cumberland, Parksville, and Qualicum Beach.
The recent changes are the second major expansion announcement since the tax was introduced in 2018. In 2022, BC announced an expansion of SVT staring January 1, 2023 to include North Cowichan, Duncan, Ladysmith, Lake Cowichan, Lions Bay and Squamish.
One should expect further expansion in the coming years. Despite local Salt Spring Island business and community leaders petitioning the BC government to include their island in the SVT to help combat a lack of homes for residents and employees, BC did not include the municipality in these recent changes. While BC Finance Minister Katrine Conroy stated that BC would consider all the BC Gulf Islands including Salt Spring to be subject to SVT, she confirmed they have no plans at this time to include resort municipalities such as Whistler, Tofino and Osoyoos.
U.S. Vacancy Taxes
In November 2022, San Franciscans voted in favor of Proposition M, The Empty Homes Tax. Effective January 1, 2024, owners of San Francisco properties with at least three residential units will be taxed on any residential unit that is vacant for more than 182 days in a year. The tax is calculated on a per vacant unit basis depending on the unit’s size, with taxes ranging from US$2,500 to US$5,000 per unit the first year vacant and increasing each subsequent year still vacant. Exemptions from the tax include single family homes, two-unit buildings and primary residences.
San Francisco is not the first U.S. city to enact a vacancy tax. Oakland, California enacted the Vacant Property Tax Act in 2018 while Washington, D.C.’s Vacant Buildings laws have been in place since 2016. Over the last few years other California cities such as Los Angeles and San Diego have debated vacancy tax proposals.
Summary
If you own Canadian or U.S. property and want to discuss these taxes and how they may apply to you, please contact us.
