National vacancy tax coming soon

Overseas owners of homes in Canada, outside of parts of British Columbia, could soon be subjected to a national vacancy tax for the first time.

The proposed tax was part of the platform of the federal Liberals, who won the October federal election.

The first of its kind, the national equity tax proposes to penalize overseas-based real estate buyers by one per cent on the property’s assessed value, per calendar year. The parliamentary budget office expects the tax would rake in revenues of $217 million in the first year.

The tax would apply to all residential properties owned by non-Canadians who are not resident in Canada — including corporations and trusts — but houses, condos and townhomes that are rented to tenants who are not immediate family members will be exempt.

“To limit the housing speculation that can drive up home prices, we will put in place a consistent national tax on vacant residential properties owned by non-Canadians who don’t live in Canada,” the Liberal Party wrote in its campaign platform.

Overseas owners of homes in some areas of B.C. are already charged a two per cent annual Speculation and Vacancy Tax by the B.C. government. Canadian owners of unoccupied or underused second homes in those areas of B.C. are also charged the tax, at 0.5 per cent per year.

This is on top of the one-timeonly 20 per cent foreign buyer tax that overseas buyers have to pay on the purchase of a home in certain parts of B.C. and Ontario.

It is not yet clear whether Canada’s new federal vacancy tax on foreign homeowners would be added on top to B.C.’s Speculation and Vacancy Tax, or whether it would replace it.

The B.C. and Ontario foreign buyer taxes shifted the attention of Chinese buyers — the largest group of foreign homebuyers in Canada — from Vancouver and Toronto to other centres, according to Juwai.com, a China-based real estate portal. As of 2018, Chinese inquiries for residential purchases in Montreal grew by 35.7 per cent year-over-year.