Starting in 2023 an annual tax will be levied on vacant Toronto residences. A property is considered vacant if it has either been unoccupied for a total of six months during the previous calendar year or it is deemed vacant under By-Law 97-2022.
The objective of the City of Toronto’s Vacant Home Tax (VHT) is to increase the supply of housing by discouraging homeowners from leaving their properties unoccupied, and compelling them to either rent or sell their vacant properties. Revenues collected from the Vacant Home Tax will be put towards affordable housing initiatives.
Declaration of Occupancy Status
Annual declaration of the status of residential properties is mandatory. Homeowners or agents of homeowners must declare the status of their properties irrespective of whether the homeowner is living at the property. The declaration will determine whether the tax applies. Principal residences may be left unoccupied for a total of six months. Failure to declare or making false declarations could result in a fine of $250 to $10,000. Failure to make an annual declaration by the deadline or to provide supporting documentation will result in the residential property being deemed vacant.
A Toronto residence that is declared, deemed, or determined to be vacant for more than six months during the previous year will be imposed a Vacant Home Tax of one percent of the Current Value Assessment (CVA) for the following year. For example, if a property was vacant in 2022 and the CVA of a property is $1,000,000, the tax amount billed would be $10,000 (1% x $1,000,000), which would be payable in 2023.
Types of Property Status Declarations
If your property is either declared, deemed, or determined vacant, it will be subject to the Vacant Home Tax. A property can be “declared” vacant by the homeowner through their property status declaration. A property will be “deemed” vacant if the owner fails to make a property status declaration. A property that has been selected for audit or on review for a Notice of Complaint or appeal can be “determined” to be vacant upon completion of the review. For a complete list of different types of property status declarations, click here.
Eligible exemptions from the VHT include the death of a registered owner, repairs or renovations, principal resident is in care transfer of legal ownership, occupancy for full-time employment, and a Court order. For a description of each exemption and the required supporting documentation, please click here.
The VHT has implications for property transactions as well. Purchasers and vendors are responsible for ensuring declarations have been filed. The VHT will form a lien on the property, and any unpaid taxes become the purchaser’s responsibility. For a closing that occurs before the closing of the declaration period on February 2nd, the vendor must complete the declaration prior to closing, and for a closing that occurs after February 2nd, the purchaser is responsible for completing the declaration in the following year.
Audits / Notice of Complaint / Appeals
A status declaration can be selected for audit on a random or specific criteria basis. If selected, the owner will have to provide either evidence to substantiate their claim of occupancy or any exemption. If you disagree with the Vacancy Tax Notice or Supplementary Assessment, you may file a Notice of Complaint to have the city review your property’s status. Finally, if you disagree with the decision made on your Notice of Complaint, you will have 90 days to submit an appeal request.
Mayor John Tory predicts the VHT to generate between $55-66 million per annum, and the tax will be enforced heavily through compliance audits. The tax will be an unwelcome sight for those who live between cities and are not here for six months, but Toronto residents can expect an increase in properties up for rent or sale. It would be prudent to file a declaration diligently and honestly as the repercussions for failing to do so are considerable.
This article is provided for general information purposes and should not be considered a legal opinion. Clients are advised to obtain legal advice on their specific situations.
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