Tag Archives: vacant home tax

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


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?


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


*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?

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

Introduction – Responding To Canada’s Underused Housing Tax

Canada’s Underused Housing Tax is NOT a tax imposed because the “foreign owner” doesn’t spend enough time in the property. Rather Canada’s Underused Housing Tax is a tax imposed because the “foreign owner” doesn’t make the property sufficiently available to non-owners!!

This is the fourth in my series of posts about Canada’s “citizenship-based” Underused Housing Tax.

The first three post are:

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

The purpose of this post is two-fold:

First: to explain what “Canada’s Underused Housing Tax” really means for “foreign owners” of certain Canadian property:

Conclusion: It means that foreign owners who own property that is NOT in a designated recreational location and who do NOT release their property into the rental market will be forced to pay the 1% tax.

Second: to explain that owners of most Canadian residential property that is not in a designated recreational location, who are neither Canadian citizens nor permanent residents of Canada can avoid releasing their property into the rental market ONLY if they either:

1. Pay Canada’s Underused Housing Tax

2. Sell their property in Canada

In my opinion U.S. (and other foreign residents) should be advised to simply pay the annual tax.

The Government Of Canada’s “Underused Housing Tax” is designed to force “foreign owners” of property to choose among the choices of: releasing their property into the rental market, paying the 1% tax or selling their property!

Explaining this conclusion.

This post ignores the “fringe situations” of properties that are newly purchased, uninhabitable, etc. I am focussing on the situation as it is likely to affect the majority of people. I urge people to read the actual legislation.

Final warning!!! All individual owners of residential housing in Canada who are neither Canadian citizens nor permanent residents of Canada are required to file the Underused Housing Tax return even if the tax is not payable! The penalty for failing to file the return is $5000 CDN.

Here we go …

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