Canada: Proposal for federal 1% tax on “underused” or vacant homes owned by non-residents

A proposal for a new annual 1% tax to be imposed on the value of “underused” or vacant homes owned by non-resident non-Canadians.

Proposal for federal 1% tax on “underused” or vacant homes owned by non-residents

The Department of Finance launched a consultation on a proposal for a new annual 1% tax to be imposed on the value of “underused” or vacant homes owned by non-resident non-Canadians.

This federal tax is proposed to be effective 1 January 2022 (as previously announced in the 2021 federal budget).

Finance has requested comments from stakeholders to share their views and feedback on the proposed approach to this tax. Comments are due on or before 17 September 2021.

Finance expects to release draft legislative proposals for public comment later this year, following the consultation.


As proposed, the 1% underused housing tax would apply each year to the legal owner of a residential property in Canada as of the end of the calendar year, when the owner is:

  • Required to file an annual declaration for the property for that calendar year
  • Ineligible to claim an exemption in respect of that person’s interest in the property for that calendar year

The underused housing tax would be calculated by multiplying the specified value of the property by 1%. If there are multiple owners of one property, each owner would be liable for this tax in proportion to their "interest" in the property. Certain key terms related to this tax—e.g., interest, specified value and residential property—are defined in the consultation paper.

Under this framework, certain residential property owners in Canada would be required to file an annual declaration with the Canada Revenue Agency for each Canadian residential property they own, beginning with the 2022 calendar year (which would be due on or before 30 April 2023). This requirement would not apply to an individual who is a Canadian citizen or a permanent resident of Canada (unless that person holds the property interest as a partner in a partnership or as a trustee of a trust). Also excluded from this treatment would be corporations incorporated in Canada whose shares are listed on a Canadian stock exchange, registered charities, and cooperative housing corporations, among other entities.

There would be 12 potential exemptions from the tax, such as when a property owner meets a minimum "qualifying occupancy" test, the legal owner dies, the property is held as inventory, the property is uninhabitable, or the property is newly acquired or constructed. Depending on whether an owner is a corporation incorporated in Canada, a partnership or trust, owners may also be exempt depending on the status of direct and indirect shareholders, partners or beneficiaries, respectively.

KPMG observation

British Columbia currently applies an annual provincial speculation and vacancy tax that is intended to target foreign and domestic property owners who do not pay income tax in British Columbia. This tax applies at a rate of 0.5% or 2% of assessed value (depending on the owner) and applies to residential properties in certain areas of the province. The tax is subject to several exemptions, including British Columbia primary residences and qualifying long-term rentals. In addition, owners of residential property in Vancouver deemed or declared vacant are subject to an additional "empty homes tax" (increased to 3% from 1.25% for 2021).

Read an August 2021 report prepared by the KPMG member firm in Canada


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