Introduction – Responding To Canada’s Underused Housing Tax
Because, "Not All Forms Of @CitizenshipTax Are The Same": Commentary on the @RepBrianHiggins outrage at the CDN tax on CDN property owned by US citizens … https://t.co/h1N58bvBIl
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) February 19, 2023
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 …