You could be targeted by the new Underutilized Dwelling Tax!

Find out who is affected by this new tax and the obligations it entails.

In short, as of January1, 2022, a new law has been introduced by the federal government covering all owners of residential property in Canada. The Underutilized Dwelling Tax Act (“Act”) is designed to slow the escalation of the real estate market in certain regions of Canada.

Be aware of your obligations! Canadian private corporations, most trusts, partnerships and not-for-profit organizations are not excluded owners under the Act, and are generally required to file an annual declaration by April 30 of the following calendar year.

VIGILENCE IS THEREFORE REQUIRED, as this Act is much broader in scope than originally anticipated at the time of the federal budget announcement. This new tax on underutilized dwellings (hereinafter “Tax”) essentially applies to vacant or underutilized residential real estate located in Canada that is owned directly or indirectly by a non-Canadian non-resident. However, you may still be subject to the Act.

In concrete terms, it provides for two obligations:

  • Produce a mandatory annual declaration for each residential property owned in Canada as of December 31 of any year, and
  • Pay an annual tax of 1% on the value of vacant or underutilized residential property for certain tax filers.

It is important to note that even if no tax is payable, the filing of the declaration will remain mandatory for the vast majority of owners of residential properties in Canada covered by this Act.

Specifically, this Act requires owners of vacant or underutilized residential real estate in Canada held on December 31 of a given calendar year to pay an annual tax equal to 1% of the value of the real estate they own (based on their share of ownership).

Please note that failure to file or late filing of a return will result in substantial penalties:
$5,000 for an individual and $10,000 for a corporation.

We invite you to read the full article in PDF format, by Sylvie Therrien and Jerry Médénou, to better understand the obligations of this law. >>>