Finance is giving stakeholders an opportunity to share their views and feedback on the design of a proposed "underused housing tax". Finance has launched a consultation on implementing a new annual 1% tax on the value of underused or vacant homes owned by non-resident non-Canadians. This federal tax is proposed to come into effect on January 1, 2022 (as previously announced in the 2021 federal budget).

Interested stakeholders may provide their comments on Finance's proposed approach to this tax on or before September 17, 2021. Finance expects to release draft legislative proposals for public comment later this year, following the consultation.


 Finance has released a consultation paper that overviews the proposed approach for the new tax and key parameters. Specifically, 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, where the owner is:

  • Required to file an annual declaration for the property for that calendar year under the proposed framework
  • Ineligible to claim an exemption in respect of their 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. Finance also defines key terms related to this tax (e.g., interest, specified value and residential property) in the consultation paper.

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

The paper further outlines 12 potential exemptions from the tax. Generally, the framework provides that an owner may be exempt where the property 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.

Finance also sets a remittance deadline of April 30 of the following calendar year and discusses proposed compliance and enforcement-related rules (consequences for failing to file a declaration and other penalties).


 Finance is seeking feedback on key design aspects of the proposed underused housing tax, including:

  • The definition of "residential property"
  • The definitions of "owner" of residential property and "interest" in residential property
  • The value on which the tax would apply
  • The definition of "excluded owner"
  • The exemptions
  • The annual declaration requirement and the consequences of failing to file the declaration
  • Whether there should be special rules for residential properties located in smaller, resort and tourism communities, and if so, what those rules should be.

KPMG observation

Finance has also invited input from all interested stakeholders on a coordinated collection and administrative approach for this federal tax and similar taxes levied by other jurisdictions in Canada. For example, British Columbia currently applies an annual provincial speculation and vacancy tax, intended to target foreign and domestic property owners who do not pay income tax in British Columbia. The B.C. speculation and vacancy 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 Columbian's 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).

For more information, contact your KPMG adviser.

Information is current to August 17, 2021. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500