Examples of Underused Housing Tax Application

The following are examples of how the Underused Housing Tax may apply and are intended for illustrative purposes only and do not constitute legal advice. Always consult with legal counsel.

Example 1:

Claudia was born in the Dominican Republic in 1981. She moved to Canada four years ago on a work permit but has not yet acquired permanent resident status or her Canadian citizenship. In 2020, she bought her first house. One year later, she bought a cottage on Muskoka Road 118 (postal code: P0B 1E0), where she lives and works remotely for all of July and August. She wants to know if the Underused Housing Tax applies to her and her residential properties.

Claudia should first review the list of excluded owners to determine if she has any obligations or liabilities under the Act.

Claudia does not meet any of the qualifications of excluded owners. She should then check the list of affected owners to confirm she is subject to the Underused Housing Tax.

Because she is not a Canadian citizen or permanent resident, Claudia is an affected owner. She will therefore have to file the Underused Housing Tax return. To determine if she is subject to paying the annual property tax, she must look at the exemptions listed.

Assuming the home Claudia bought in 2020 serves as her primary place of residence, this property is exempt from the Underused Housing Tax. When Claudia typed her cottage’s postal code into the Underused housing tax vacation property designation tool, she received the following message:

“Based on the postal code you entered, the residential property is located in an eligible area of Canada for purposes of the vacation property exemption.”

Because Claudia lives in her cottage for the months of July and August, she also satisfies the criteria that states that she must use the residential property as a place of residence or lodging for at least 28 days in the calendar year.

Given the facts provided, in all likelihood, although Claudia must file the Underused Housing Tax return, both of her residential properties would likely be exempt from the annual 1% property tax.

Example 2:

George was born in Brampton, Ontario in 1968. He owns a semi-detached home in Caledon, Ontario. He bought the home in 2004. George wants to know if the Underused Housing Tax applies to him and his residential property.

George should first review the list of excluded owners to determine if he has any obligations or liabilities under the Act.

Because George is a Canadian citizen, he may qualify as an excluded owner if he is not included in the list of affected owners. To check this, he must consult the list of affected owners. In these circumstances, none of the qualifications for affected owners apply to George.

He is a Canadian citizen, and he bought his home himself, not as the result of a trust or partnership.

Given the facts provided, it is likely that George would qualify as an excluded owner and would not have to file the Underused Housing Tax return or pay the 1% property tax on his home.

Example 3:

Windler Inc. is a company that was incorporated in Maine, United States, in 1998. They own several condominium units in Nova Scotia and New Brunswick to house their employees when visiting Canada. Many of these residential units are sometimes left empty. They want to know if the Underused Housing Tax applies to them and their residential properties.

Windler Inc. should first review the list of excluded owners to determine if they have any obligations or liabilities under the Act.

Windler Inc. does not meet any of the qualifications of excluded owners. They should then check the list of affected owners to see if they are subject to the Underused Housing Tax. Windler Inc. is a corporation that was incorporated outside of Canada and would therefore qualify as an affected owner.

Before determining that Windler Inc. must file the Underused Housing Tax return and pay the accompanying property tax, they must check the list of exemptions. It is possible that despite needing to file the return, they may be exempt from paying the annual tax on the property.

None of the listed exemptions apply to Windler Inc. They are not a Specified Canadian corporation nor a partner of one; they are not new owners of the property in question, nor are they deceased or representing a deceased owner. Their properties are habitable and functional for occupancy, do not qualify as vacation property, and have remained vacant too long to qualify for an exemption based on occupancy of the residential property.

Given the facts provided, Windler Inc. would likely have to file an Underused Housing Tax return and pay the annual 1% property tax on each applicable residential property.

For information on how to apply the Act to your own circumstances,click here.