Tag Archives: Canada Underused Housing Tax

Canada’s Underused Housing Tax May Violate The Non-discrimination Clause In Tax Treaties

Purpose and summary of this post:

Because Canada’s Underused Housing Tax treats nonresidents of Canada differently, based on their citizenship, the tax may violate the non-discrimination Article in many of Canada’s tax treaties (including the Canada U.S. tax treaty). Nonresidents of Canada are treated differently depending on whether or not they are Canadian citizens. For example a Canadian citizen who is a nonresident of Canada is “excluded” from the tax. But, a U.S. citizen who is a nonresident of Canada is “affected” by the tax. This appears to violate paragraph 1 of Article XXV of the Canada U.S. tax treaty (and other Canadian tax treaties).

Paragraph 1 of Article XXV of the Canada U.S. tax treaty:

1. Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith that is more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances, particularly with respect to taxation on worldwide income, are or may be subjected. This provision shall also apply to individuals who are not residents of one or both of the Contracting States.

The question is what is meant by “in the same circumstances”. Relevant commentary from the OECD and from U.S. Treasury underscores that the words “particularly with respect to taxation on worldwide income” include whether the individual is taxed as a tax resident of the country or as a nonresident of the country.

Arguably all “nonresidents” of Canada are “in the same circumstances” (in relation to Canada’s tax system). Hence, “nonresidents” should not be treated differently depending on their citizenship.

Discussion and analysis follows.

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Introduction – The Hypocrisy Of Representative Brian Higgins Continues

“Good Americans should NOT have a Canadian tax imposed on them!”

This is a recent statement from Congressman Brian Higgins. Click on the following tweet to listen to a recent interview with the Congressman.

The background …

As discussed here, Canada has a number of “Vacant Home Taxes“. Canada’s Underused Housing Tax is taxation based on citizenship and/or immigration status. (It is NOT based on “tax residency” and “tax residency” is irrelevant.) Notably the United States is the only major country in the world that makes citizenship and/or immigration status a sufficient condition for “tax residency”. In fact the United States imposes worldwide taxation and FATCA compliance on a approximately one million Canadian residents. Nevertheless, Congressman Higgins is certain of the injustice of Canada’s imposition of a citizenship based tax on U.S. residents. (The fact that the tax is based on property located in Canada appears to him to be irrelevant.) Furthermore, he seems intent on NOT acknowledging that:

“Good Canadians should not have an American tax imposed on them”.

Apparently what’s okay for the USA is somehow not okay for Canada.

But, hypocrisy aside …

Congressman Higgins’s objections hopefully will generate a discussion of the injustice of citizenship taxation generally. While ignoring the fact that the U.S. citizenship tax regime imposes direct U.S. taxation on the Canadian source income of millions of Canadian residents, Congressman Higgins is certain that Canada’s tax (which affects at most a few thousand Americans) violates the U.S. Canada tax treaty. In other words, Congressman Higgins’s hypocritical position appears to include:

Only the United States has the right to impose taxation on the residents of other countries under the principle of citizenship taxation“.

In the spirit of affirming that Canada’s citizenship tax on Americans is in violation of the principle that only the United States has the right to engage in citizenship taxation, Congressman Higgins appeared as a witness before a Canadian Parliamentary Committee to discuss Canada’s Underused Housing Tax. The hearing took place in June 2023. During the hearing he raised the spectre of two possible legal challenges to Canada’s threat to the (presumptive) U.S. monopoly on citizenship taxation. The claim that Canada’s Underused Housing Tax violates the “non-discrimination” Article of the Canada U.S. tax treaty (and other Canadian tax treaties) is the subject of this post.

Food for thought:

The non-discrimination clause in the standard tax treaties suggests that certain kinds of citizenship taxation may be inappropriate. (How this reality bears on the question of U.S. citizenship taxation generally will be the subject of a separate post.)

Outline:

Part A – About Canada’s Underused Housing Tax
Part B – Representative Brian Higgins June 5, 2023 testimony to Canadian Parliamentary Committee – Includes “potential violations”
Part C – Thinking about the “non-discrimination” clause – A basic analysis
Part D – What does U.S. Treasury’s Technical Explanation suggest?
Part E – What about Canadian tax treaties with other countries? – Considering the Canada UK treaty
Part F – Appendixes – Various Tax Treaties

Part A – About Canada’s Underused Housing Tax

The statute and regulations are here. S. 2 of the statute deems certain individuals to be “excluded owners” of residential property. Those “excluded” from the application of the Act are defined to include:

(b) an individual who is a citizen or permanent resident, except to the extent that the individual is an owner of the residential property in their capacity as a trustee of a trust (other than a personal representative in respect of a deceased individual) or as a partner of a partnership;

To put it simply: Canadian “citizens” and those with the legal status of being “permanent residents” of Canada are excluded from the application of the statute. They are not subject to the tax. Those who are NEITHER Canadian citizens NOR permanent residents of Canada are (depending on the occupancy of the property) subject to the tax. This means that (in general) U.S. citizens, living in the United States, are subject (as”affected” owners) to the statute and may (depending on the occupancy of the property) be required to pay the tax.

To simplify the application of the law:

Canadian citizens and permanent resident owners (regardless of whether they are tax residents of Canada) are not subject to the tax.

U.S. citizens (who are neither Canadian citizens nor permanent residents) are subject to the tax.

To simplify the context:

Imagine four neighbors living in Buffalo, New York. They all drive Ford trucks. They all drink Budweisers. They all watch the Buffalo Bills on Sundays. They all work for the same company. They all file taxes jointly with their spouses. They all own seasonal homes (in their names only) located in Fort Erie Ontario, Canada (where they become “neighbours” instead of “neighbors”. Interestingly and completely arbitrarily, Canada’s Underused Housing Tax may or may apply to them. Let’s see how the tax might affect each of them.

Neighbor 1: Neither a Canadian citizen nor permanent resident of Canada – subject to the tax

Neighbor 2: A dual citizen of Canada and the United States – NOT subject to the tax

Neighbor 3: A U.K, citizen who has the legal status of “permanent resident” of Canada, but also a U.S. Green Card holder – NOT subject to the tax

Neighbor 4: A U.K. citizen living in the United States on an L visa – subject to the tax.

Notice that all four of these neighbors live in Buffalo, New York and are NOT tax residents of Canada. Neighbor 2 (Canadian citizen) and Neighbor 3 (permanent resident of Canada) are NOT subject to the tax. Neighbors 1 and 4 (neither Canadian citizens nor permanent residents of Canada are subject to the tax).

Part B – Representative Brian Higgins June 5, 2023 testimony to Canadian Parliamentary Committee – Includes “potential violations”

Excerpt from his testimony:

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A Primer On Canada’s Vacant Home Taxes For U.S. Citizens And Residents

Disclaimer: This post is of a general nature. I will assume that the owner of the property is an individual person. This post does NOT address situations where the property is owned by a corporation, trust or other kind of entity. Vacant property regimes are different and may include enhanced rules for situations where residential property is NOT owned by an individual (including corporations, trusts, etc.). Under NO circumstances should the information in this post be considered to be complete. It is designed to provide an overview. In many cases you will be well advised to seek professional help. (I am thinking mainly of Canada’s Underused Housing Tax and the BC “Speculation And Vacancy” taxes.)

Outline:

Part I – Introduction – The Housing Shortage Of 2023
Part II – Impacts of Canada’s Underused Housing Tax on Canadian border communities
Part III – How Vacant Home Taxes Work – The Usage Of The Property ALWAYS Matters And Can Ensure The Tax Is Avoided
Part IV – How Vacant Homes Tax Differ – The Three Categories Of Taxes
Part V – The BC “Speculation And Vacancy Tax” – Moving To Canada
Part VI – Concluding Thoughts

Part I – Introduction – The Housing Shortage Of 2023

Vacant home taxes are a new kind of tax in Canada. They are the inevitable result of a rise in housing prices, a shortage of rental housing caused by short term rentals (AirBNB and others), a rise in rents (caused by the shortage of rental housing) and a political climate that is responsive to the housing shortage. This is NOT just a problem in Canada, but also in other countries. A recent New York Times article reported on similar conditions in Portugal (which interestingly resulted in the cancellation of Portugals “Golden Visa Program”).

Canada’s Family Of Vacant Home Taxes

Various Canadian governments have created a family of Canadian Vacant Home Taxes. Vacant Home Taxes are significant levies on owners who neither occupy their property as a principal residence nor rent the property to “arms length” tenants. The only true “safe islands in an ocean of punitive taxation” are in circumstances where ALL owners occupy the property as a principal residence (except possibly the BC Speculation And Vacancy Tax) or the property is rented and occupied by an “arms length” tenant for at least six months of the year.

Vacant Home Taxes are levied by all three levels of government: Federal (Canada’s Underused Housing Tax), Provincial (BC Speculation And Vacancy Tax) and Municipal (Toronto, Vancouver, Hamilton and Ottawa, etc.). “Canadian Vacant Home Taxes” are becoming increasingly prevalent.

Property owners can be impacted by more than one tax. A U.S. resident owning a vacant home in British Columbia could be subject to each of: Canada’s Underused Housing Tax, Vancouver’s Empty Home Tax and the BC Speculation And Vacancy Tax. Each of these taxes is independently punitive. Some might argue that the combined effect of all three is confiscatory. For example a U.S. resident who owned a vacant condo in Vancouver valued at 3.3 million Canadian dollars would be subject to combined “vacant home taxes” of $264,000 CDN for the 2023 year. As the following tweet indicates:

Interesting! At the current rate of Vancouver’s vacancy tax (5%), and given BC’s vacancy tax (2%) and the federal underused housing tax (1%), the author’s condo (valued in 2017 at $3.3 million) could trigger additional annual tax of $264,000 for 2023 alone (if valued the same).

Part II – Impacts of Canada’s Underused Housing Tax on Canadian border communities

Canada’s vacant home taxes have been particularly upsetting to U.S. residents who own second homes in Canada.

In 2017 a U.S resident, in an article in the Wall Street Journal, referred to the Vancouver “Empty Home Tax” as “Canada’s Tax On Being American”.

The author, claiming that the tax is aimed at “foreigners” writes:

A few months later, Vancouver introduced an annual “empty home tax” equal to 1% of the property’s assessed value. Since the levy is inapplicable if your Vancouver home is your principal residence, it’s obviously aimed at foreigners like us. At our condo’s current valuation, the tax will cost us almost US$33,000 a year.

She makes the further claim that the Vancouver Empty Home tax is based on nationality:

Nationality-based taxes are among the worst kinds of protectionism. The North American Free Trade Agreement expressly covers real estate owned by Americans in Canada. For that matter, Nafta covers real estate owned by Canadians in the U.S., of which there is plenty.

Although the Vancouver Empty Home Tax is NOT based on nationality (although Canada’s “Underused Housing Tax” is based on nationality), the author is correct that citizenship/nationality taxes are offensive. That said, the United States is the only major country in the world that defines “tax residency” in terms of citizenship/nationality (making the author’s claim somewhat hypocritical).

More recently, New York Congressman Brian Higgins has been particularly aggressive in objecting to the application of Canadian vacant property taxes to U.S. residents. The Canadian Government held hearings on the “Impacts of the Underused Housing Tax on Canadian border communities”. The hearings took place on June 5, 8 and 19 2023 and may be accessed here. On June 5, 2023 Congressman Higgins was a witness at the hearing. His comments referenced the application of Canada’s “Underused Housing Tax” to U.S. residents living in upstate New York. A transcript of his comments may be read here. Congressman Higgins is requesting that his constituents in New York State be exempted from the tax. His closing statement at the hearing was:

Mr. Brian Higgins:

I think you’re correct in that I understand why Canada would impose a tax on large swaths of land because of the larger problem that it creates. What I believe about that is really not relevant. That’s for you to decide. I suppose what I would ask each of you to consider is whether or not this tax, the vacant and underutilized tax, was intended to affect communities. You refer to them as rural communities that are outside of the urban areas. I refer to them as cottage communities.

Was that the intent, and if it wasn’t, is there some way that could be contemplated as it relates to revising that to exclude certain properties, like seasonal properties, that this was seemingly not intended to include?

Citizenship Taxation

Canada’s Underused Housing Tax is NOT based on “tax residency”. Rather, Canada’s Underused Housing Tax is a tax based on “citizenship” or”immigration status”. The U.S Tax code imposes income taxes based on “citizenship” and “immigration status”. Significantly, the U.S. imposes taxation on the Canadian source income of those Canadian residents who are also U.S. citizens. It is therefore reasonable to conclude that:

1. Congressman Higgins is objecting to Canada applying “citizenship taxation” on U.S. citizens living in the United States; while

2. the U.S. applies “citizenship taxation” to many Canadian citizens living in Canada.

In any case, Congressman Higgin’s complaint is about “citizenship taxation“.

Part III – How Vacant Home Taxes Work – The Usage Of The Property ALWAYS Matters And Can Ensure The Tax Is Avoided

Generally every property owner (Canada’s Underused Housing Tax is the exception) is required to report every year and answer questions about the usage of the property. These who fail to report are subject to the maximum tax. Those who do report must demonstrate that they are either NOT required to pay the tax (principal residence, rented out or some other exemption) or not subject to the maximum tax (citizenship/immigration status or tax residency status). All vacant home taxes start with a presumption that the owner must pay the full tax. The property owner bears the burden (by filing the return and providing information about the usage) or demonstrating that it (he, she or an entity) is exempt or subject to a lower tax.

“Some” ways of avoiding the tax …

Generally, if the property is rented to “arms length” tenants for at least six months of the year no vacant property tax is owing. With the exception of the BC “Speculation And Vacancy” Tax occupancy by the owner as a principal residence will result in no tax payable.

Vacant Home Taxes In Canada- Three Categories

Category 1. Based On Ownership: Targets ALL owners of the property and the tax is imposed based on the usage of the property – Targets people based on and only on being the owner of the property. The tax may be avoided based on the usage of the property (generally if used as a primary residence or if it is rented to tenants). (Municipal)

Category 2. Based On Ownership + Citizenship/Immigration status of the owner: Targets owners of the property based on the citizenship and immigration status of the owner (NOT being a Canadian citizen or Permanent Resident of Canada) – The tax may be avoided based on the usage of the property (Federal – Canada’s Underused Housing Tax).

Category 3. Based On Ownership + Citizenship/Immigration status + tax residency of the owner + source of the owner’s income – (British Columbia “Speculation And Vacancy Tax”)

Generally the BC “Speculation And Vacancy Tax” operates as follows:

Step 1: Targets all owners of the targeted properties and presumes they are subject to the maximum tax (every owner is required to file a return)

Step 2: Identifies those owners who are Canadian citizens or permanent residents. (Being a Canadian citizen or permanent resident” is a necessary BUT NOT SUFFICIENT condition to being subject to a lower rate of tax or being exempt from the tax.) An individual must be a “specified Canadian citizen” or “specified Permanent Resident” or “resident of British Columbia” to have preferential treatment or an exemption from the tax. (Note that if a Canadian citizen or Permanent Resident is is an “untaxed worldwide earner”, then that person cannot be a “specified Canadian citizen” or “specified permanent resident”.

Step 3: Determines whether the owner is an “untaxed worldwide earner. This is a determination based largely on the “tax residency” and income of of the owner. Generally an individual is an “untaxed worldwide earner” if more of his income (or combined income with his spouse) is NOT subject to tax in Canada than is subject to tax in Canada. (Significantly the income of both spouses is combined to determine whether the individual is an “untaxed worldwide earner”.)

Step 4: Determines whether the owner is a “specified Canadian citizen” or “specified Permanent Resident” or “resident of British Columbia” and is therefore subject to a preferential tax rate or an exemption. Note that if the individual is an “untaxed worldwide earner” he cannot meet this requirement. (Like Canada’s Underused Housing Tax the BC “Speculation And Vacancy Tax” does discriminate based on citizenship or immigration status. (Arguably, for this reason it may violate the non-discrimination provision in the Canada U.S. tax treaty.)

Significantly, the primary residence exemption is not available to an owner who is an “untaxed worldwide earner”.

Let’s examine each of the three categories in more detail …

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@RepBrianHiggins Begins Formal Challenge Of Canada’s Underused Housing Tax

Prologue

Are Buffalo Cottage Owners Exempt From Canada’s Underused Housing Tax?

It’s Official – Congressman Higgins Begins Formal Claim That Canada’s Underused Housing Tax Violates the USMCA Free Trade Agreement

Mar 7, 2023
Press Release
Congressman Says Tax 1% Property Tax Violates Standing Trade Agreements

Congressman Brian Higgins (NY-26) is asking United States Trade Representative Katherine Tai to open formal consultations with the Government of Canada to explore if the Underused Housing Tax is inconsistent with the United States-Mexico-Canada Agreement (USMCA).

In a letter to Ambassador Tai, Rep. Higgins writes, “The United States and Canada have a longstanding, cooperative, and mutually beneficial relationship. Western New York and Southern Ontario exemplify this unique bond. The UHT’s impact on Americans who own property in Canada, however, threatens our binational community and appears to be inconsistent with the USMCA.”

One of the principles of the USMCA is the requirement that all parties not discriminate against each other or provide preferential treatment solely to domestic companies or citizens, including with respect to internal taxation. Canada’s Underused Housing Tax does not apply equally to Canadian and U.S. citizens and therefore may violate these principles. The USMCA stipulates parties can request consultations with another party when trade agreement disputes arise.

Canada recently imposed a 1% tax on “vacant or underused housing” owned by non-resident, non-Canadians. The intent was to target foreign investment speculation negatively impacting affordable housing in Canada, but it is impacting good-faith, longtime cottage owners who have maintained and enjoyed living among their Canadian neighbors for years.

Higgins began sounding the alarm about the Underused Housing Tax since it was first proposed in the Government of Canada’s Budget 2021. Most recently, Higgins asked the U.S. Secretary of State to object to the Underused Housing Tax in conversations with the Government of Canada.

Outreach from frustrated U.S. residents has increased in recent weeks as the April 30th tax form deadline approaches in Canada. Congressman Brian Higgins has heard from hundreds of U.S. residents negatively impacted by the Underused Housing Tax, including over 320 property owners who completed an online survey.

Congressman Higgins is a member of the House of Representatives Ways and Means Subcommittee on Trade and serves as Co-Chair of the Northern Border Caucus and the Canada – U.S. Interparliamentary Group. His Western New York district, which includes the Cities of Niagara Falls and Buffalo, borders southern Ontario. 

The Opportunity – Perhaps All Forms Of Citizenship Violate The Canada US Mexico Free Trade Agreement?

This is an opportunity to bring all issues of citizenship tax to the attention of those responsible for interpreting the free trade agreement.

PFIC anyone?

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John Richardson – Follow me on Twitter @Expatriationlaw

Like Canada’s Underused Housing Tax, U.S. Estate Taxation Depends On Citizenship Of The Owner

Taxation based on source vs. taxation based on residence – More commentary on the Canada Underused Housing Tax

Suzanne Herman has got it right!

There is no doubt that Canada’s “Underused Housing Tax” is triggered by citizenship. There is no doubt that Canada’s Underused Housing Tax is unfair to Americans who own second homes and cottages in Canada. There is no doubt that Canada’s “Underused Housing Tax” in its application to noncitizen and nonresidents is similar to the U.S. Estate Regime*. (They both impose taxation on the noncitizen/nonresident owners of property located in their countries.) There is no doubt that while complaining about Canada’s “Underused Housing Tax” that Congressman Higgins should be apologizing for the way the U.S. Estate Tax treats nonresident/noncitizen owners. They are both taxes triggered by (n0n) citizenship and are based on property located in their respective jurisdictions.

Taxation of nonresidents triggered by the ownership of local property is different from U.S. taxation of non-US source income received by persons who don’t live in the United States

That said, there is no moral equivalence between Canada’s Underused Housing Tax based on property located IN CANADA and the U.S. taxation of INCOME received OUTSIDE THE United States by a person who does not live in the United States. The United States is using “citizenship” as a pretext to claim that people who are tax residents of other countries (including Canada) are U.S. tax residents.

It is an assumption of international taxation that every country has the right to define who are its “tax residents”. On the other hand, no country has the right to (1) claim that the tax residents of other countries are also their tax residents and (2) disable those “claimed” tax residents from using a treaty tie break provision to avoid the claim of tax residence! (The “saving clause” included in all U.S. tax treaties prevents U.S. citizens from using a treaty residence tax break provision to assign allocate residence to solely their country of actual residence.)

In FATCA related discussions it has been common for Government Officials to claim that the United States has the sole right to determine who are its tax residents. Although true, this cannot mean that the United States (or any country) has the right to claim the residents of another country as its tax residents. (The debate is illuminated here and here.)

It’s about American exceptionalism

The international standard for definitions of tax residence is “residence”. Residence is a term that is correlated with the “circumstances of one’s life”. The United States (in addition to “residence”) claims tax residence based on “citizenship” (which is mostly based on the “circumstances of one’s birth”). To put it simply U.S. tax residence is primarily defined in terms of the “circumstances of birth” rather than the “circumstances of life”.

In the 21st Century there is almost NO correlation between citizenship and residence.

At first blush, one might say:

Both Canada and the United States are taxing based on citizenship. They are both equally wrong. Nothing could be further from the truth.

Suzanne Herman’s tweet explains the difference. As her tweet makes clear the Canadian tax is based on property that is located in Canada. It is a tax based on citizenship because of property located in Canada. Although the tax is based on the citizenship of the owner, Canada is NOT claiming that U.S. residents are “tax residents of Canada” for all purposes. The Canadian tax, although based on citizenship, is a tax based on the ownership of property located in Canada.

On the other hand, the United States is imposing full taxation on certain Canadian residents because and only because the U.S claims them as U.S citizens. The claim is that because they were “Born In The USA” that they are U.S. tax residents for ALL purposes. They are subject to U.S. taxation on ALL of their income received outside the United States. They are subject to reporting on all their assets LOCATED OUTSIDE THE UNITED STATES. This is because and only because they are U.S. citizens.

To put it simply: The U.S. is using citizenship (the circumstances of their birth) to claim that residents of other countries are U.S. tax residents for ALL purposes!

A U.S. resident can avoid the Canadian tax by simply selling the property located in Canada.

A Canadian resident subject to the U.S. citizenship tax can avoid the tax only through relinquishment of U.S. citizenship or death (and that may not be enough).

Bottom line: Canada is imposing a tax based on the citizenship of the owner of property located in Canada. This is different from the U.S. imposing taxation on income earned outside the United States and received by a Canadian resident who has U.S. citizenship. The Canadian tax is based on the location of property in Canada. The U.S. tax is based on the citizenship of the person who is actually living in Canada.

The United States is using citizenship as the basis to claim the tax residents of other countries as U.S. tax residents.

The question becomes:

Should the United States be permitted to use citizenship to effectively claim the tax residents of other countries as U.S. tax residents? Should the rest of the world tolerate this blatant assault on their sovereignty and erosion of their tax base? Should the world sign tax treaties with the U.S. that entrench this principle (via the “saving clause”) in their tax treaties with the United States? Should U.S. citizens be the only people in the world who disabled because of their citizenship from being able to become treaty nonresidents?

Although all forms of taxation based on citizenship are wrong. There is no moral equivalence between Canada’s tax based on property located in Canada and the U.S. tax based on claiming Canadian residents as U.S. tax residents.

John Richardson – Follow me on Twitter at @VacantHomeTax

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*Appendix – The U.S. Estate Tax System Is Similar To Canada’s Underused Housing Tax

When it comes to the ownership of U.S. situs assets:

– a U.S. citizen is subject to an 11 million dollar lifetime estate tax exemption

– a noncitizen, who is NOT domiciled in the U.S. is subject to taxation on all U.S. situs assets in excess of $60,000 USD.

Although not the specific topic of this post I highly recommend the article by Omer Harel about the application of the U.S. Estate Tax to nonresident aliens. The article includes:

The U.S. estate tax imposed on NRAs today is an inefficient tax without serious policy justifications and it distorts behavior in ways that the estate tax imposed on residents does not. Also, this tax decreases the attractiveness of investments in the U.S. from the NRAs’ perspective as it forces NRAs to invest in U.S.-situated assets using a foreign corporation. This insulates them from estate tax exposure and subjects them to additional costs and higher taxes that the U.S. Treasury does not necessarily benefit from. The fairness arguments that were presented to support the retention of the NRA estate tax are not persuasive as NRAs owe much lower ‘‘debt’’ to the U.S. government than residents and, unlike residents, are sometimes unable to fully benefit from the step-up in basis. Further, after the Obama tax reform — which basically repealed the estate tax for almost all residents in 2011-2012 — the current regime has become extremely discriminatory and might in some instances violate U.S. income tax treaties.

Now that the U.S. (in particular the real estate industry) needs foreign investments more than ever, it is the right time to rethink this tax and repeal it or drastically modify it so that it will not deter foreign investors.

Bottom line: The United States is already doing exactly what Canada does in it’s Underused Housing Tax! Nobody seems to complaint about it! But, everybody should complain about it. Like Canada’s Underused Housing Tax, the U.S. Estate tax regime is simply a system of asset confiscation based on citizenship! Perhaps, Congressman Higgins should raise this issue with the U.S. Government?

Help With The Canada Underused Housing Tax

Purpose

Canada’s Underused Housing Tax is a tax which is primarily based on citizenship and immigration status. Specifically, it is a tax imposed on owners of Canadian residential property who are neither Canadian citizens nor permanent residents. It is Canada’s form of citizenship taxation. The tax will incentivize people to naturalize as Canadian citizens.

I continue to create blog posts, podcasts and videos explaining this tax (along the the Municipal Vacant Property Taxes in Toronto, Vancouver, Ottawa and other Canadian cities). This post is to consolidate this information.

I note also that opposition to this Canadian tax is growing in the United States. For example Congressman Brian Higgins (representing people in Buffalo, Niagara Falls, etc.) is organizing U.S. residents and politicians to seek a “carve out” for U.S. citizens. I encourage Congressman Higgins to approach this from the perspective of the unfairness of citizenship-based taxation generally.

If you need help (fee based) with filing the Canadian Underused Housing Tax return you may reach out to me at:

vacanthometax at runbox dot com.

I have also created a smaller dedicated site at:

VacantHomeTax.com

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My resources to assist in the understanding of this tax include:

Blog Posts:

1. US Residents Who Own Residential Property In Canada May Be Subject To Various Vacant And Underused Property Taxes

2. NY Congressman Brian Higgins Draws Attention To The Injustice Of Citizenship Taxation By Challenging Canada’s Underused Housing Tax

3. U.S. FBAR And Form 8938 Penalties May Be A Bigger Problem For U.S. Residents Than Canada’s Underused Housing Tax

4. Canada’s Underused Housing Tax: No Good Options For U.S. Residents Who Own A Second Home In Canada

5. Help With Canada’s Underused Housing Tax

6. Like Canada’s Underused Housing Tax, the U.S. Estate Tax Often Turns On The Citizenship Of The Owner of U.S. Situs Real Estate

7. @RepBrianHiggins Begins Formal Challenge Of Canada’s Underused Housing Tax

8. A Primer On Canada’s Vacant Home Taxes For U.S. Citizens And Residents

9. Canada’s Underused Housing Tax May Violate The Non-discrimination Clause In The Tax Treaty

Podcasts:

YouTube Videos:

Social Media:

Twitter – @VacantHomeTax

Facebook Group – Canada Underused Housing Tax

Facebook Page – Canada Underused Housing Tax

Reddit – Canada Underused Housing Tax And Other Vacant Home Taxes

If you need help …

If you need help (fee based) with filing the Canadian Underused Housing Tax return you may reach out to me at:

vacanthometax at runbox dot com.

John Richardson – Follow me on Twitter @VacantHomeTax

US Residents Who Own Residential Property In Canada May Be Subject To Various Vacant And Underused Property Taxes

Introduction And Purpose

Many Canadian cities are experiencing the combined effects of a shortage of affordable housing and a rise in housing prices. In short housing (whether to own or to rent) has become less available and more expensive. Factors contributing to this include: Investors preferring to “rent” their investment properties on short term rental platforms rather them releasing them into the rental market, Provincial Landlord and Tenant laws which impose laws on small landlords which are perceived as unfair, increases in property values (caused by low interest rates) which have caused an imbalance between the cost of buying residential real estate and the amount it can be rented for. (It makes no sense for a person to purchase a property for one million dollars and rent it for $2000 per month.)

Canadian Cities – Clear Laws And Easy To Understand And Significant Discontent From U.S. Owners

The above tweet references a fascinating article Wall Street Journal article written in 2017 by a U.S. owner of a Vancouver, BC condominium claiming that the tax was directed at Americans. It’s a fascinating read.

A reply to the above tweet pointed out that:

Interesting! At the current rate of Vancouver’s vacancy tax (5%), and given BC’s vacancy tax (2%) and the federal underused housing tax (1%), the author’s condo (valued in 2017 at $3.3 million) could trigger additional annual tax of $264,000 for 2023 alone (if valued the same)

As the $264,000 figure demonstrates, these “Vacant Property Taxes” are serious business which can create significant tax and penalty liability. In some cases, the taxes may force people to sell their properties!

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