Canada now operates three overlapping layers of vacant home taxation, each targeting residential properties that are left unoccupied or underused. The federal Underused Housing Tax (UHT) applies nationally to non-citizens and non-permanent residents who own residential property. The City of Toronto operates its own Vacant Home Tax (VHT), and the City of Vancouver's Empty Homes Tax (EHT) — the original model — continues to expand in scope. Property owners with secondary or investment properties must navigate all applicable layers to avoid significant penalties.
Multiple Obligations May Apply Simultaneously
The three vacant home tax regimes are independent and additive. A non-resident owner of a vacant condo in Vancouver could owe all three taxes simultaneously: the federal UHT, the Vancouver EHT, and if the property were in Toronto instead, the VHT. Each has its own filing deadline, declaration process, and penalty regime.
1. The Federal Underused Housing Tax (UHT)
The Underused Housing Tax Act, which came into effect January 1, 2022, imposes an annual federal tax of 1% on the assessed value (or, in some cases, the fair market value) of residential properties located in Canada that are owned by certain non-Canadian owners and are considered vacant or underused.
Who Is an "Affected Owner"?
The UHT uses a two-tier ownership analysis. An owner is an "excluded owner" — and therefore not subject to the UHT — if they are:
- A Canadian citizen or permanent resident who owns the property in their own name
- A publicly traded Canadian corporation
- A registered charity, co-operative housing corporation, or indigenous governing body
- A Canadian-controlled private corporation (CCPC) that is not a satellite entity
- A trustee of a specified Canadian trust, or a partner of a specified Canadian partnership
Anyone who is not an excluded owner is an "affected owner" and must file a UHT return annually, even if they ultimately owe no tax because an exemption applies. This is a critical point: affected owners must file the UHT-2900 return by April 30 each year, regardless of whether tax is payable. Failure to file even a nil return can trigger significant penalties.
UHT Exemptions from Tax (but Not from Filing)
Even where an affected owner is required to file, the 1% UHT may not be payable if one of the statutory exemptions applies. Key exemptions include:
- Occupancy by owner or spouse: The property is the owner's (or spouse's) primary place of residence for at least 180 days in the calendar year
- Arm's-length rental: The property is rented to arm's-length persons under a written lease for at least 180 days in the calendar year
- Qualifying occupation by family member: A qualifying family member (parent, child) occupies the property as their primary place of residence
- New construction: The property is not habitable because it is under construction, subject to a prescribed circumstance
- Disaster or hazardous conditions: The property is uninhabitable due to a natural disaster or hazardous condition
- Death of owner: The owner died during the year and the estate exemption applies
- Year of acquisition: The owner acquired the property in the calendar year and the ownership was not transferred from an excluded person
Filing Deadlines and Penalties
The UHT-2900 return is due April 30 following the calendar year. The penalty for failing to file is a minimum of $5,000 for individuals and $10,000 for corporations, even if no tax is owed. These penalties are steep relative to the underlying tax and justify proactive filing for all affected owners.
2. Toronto's Vacant Home Tax
The City of Toronto introduced its Vacant Home Tax effective January 1, 2022. The VHT applies to Toronto residential property owners — including Canadian citizens and permanent residents — and is not limited to non-residents as the federal UHT is.
The Toronto VHT imposes a tax of 1% of the current value assessment (CVA) of any residential property that is not occupied as a principal residence or rented out for at least 6 months of the year. For 2024, the City of Toronto increased the VHT rate to 3% of CVA, making it materially more significant.
Every Toronto residential property owner must file an annual declaration confirming the occupancy status of their property, even if the property is occupied and no tax is owed. Properties for which no declaration is received are presumed to be vacant and are assessed the VHT automatically. This declaration-first approach places the compliance burden entirely on the owner.
Toronto VHT exemptions include:
- Principal residence of the owner or permitted occupant
- Tenanted for at least 6 months during the year (must be documented)
- Owner died during the year
- Property is undergoing permitted construction or major repair
- Transfer of ownership during the year
- Property is used for permitted business purposes
3. Vancouver's Empty Homes Tax
Vancouver's Empty Homes Tax (EHT) was introduced in 2017 and has been progressively increased in rate since then. As of 2024, the EHT rate is 3% of assessed value for properties in Class 1 (residential) that are not the principal residence of the owner or a tenant and do not have an eligible exemption.
Vancouver's EHT applies only to properties within the boundaries of the City of Vancouver and is levied as a property tax add-on. The tax does not apply to properties in surrounding municipalities such as Burnaby, Richmond, or North Vancouver, though some of those municipalities have introduced their own vacancy taxes.
Like Toronto's system, every Vancouver property owner must file an annual Status Declaration confirming whether the property is occupied, rented, or vacant. The declaration deadline is typically in the spring following the tax year. Properties for which no declaration is filed are assessed at the EHT rate without further notice.
Key Vancouver EHT exemptions include:
- Principal residence of owner or their permitted family member
- Rented to tenants for at least 6 months in 30-day or longer tenancies
- Undergoing major redevelopment or construction (with an active permit)
- Owner under medical or therapeutic care outside the city
- Property sold in the year with transfer of title
4. Comparing the Three Regimes
| Tax | Who Applies To | Rate (2024) | Applies To | Annual Declaration? |
|---|
| Federal UHT | Non-citizens / non-PRs | 1% | Assessed or FMV | Yes — all affected owners |
| Toronto VHT | All Toronto owners | 3% | Current Value Assessment | Yes — all residential owners |
| Vancouver EHT | All Vancouver owners | 3% | BC Assessment value | Yes — all residential owners |
Declaration Deadlines Differ by Program
The UHT-2900 is due April 30. Toronto's VHT declaration deadlines are set by the City (typically February to March of the following year). Vancouver's EHT Status Declaration is also typically due in February to March. Missing any of these deadlines — even for an exempt or non-taxable property — can trigger penalties.
5. Implications for Canadians with Secondary Properties
Canadian citizens and permanent residents may be surprised to learn that the federal UHT does not apply to them in most cases — but the municipal programs in Toronto and Vancouver do. A Canadian who owns a condo in Toronto as an investment property, or a vacation property in Vancouver, faces annual declaration obligations under those municipal programs regardless of their citizenship status.
For Canadians who own secondary properties in high-demand urban markets, the practical implications include:
- Annual declarations are mandatory even for occupied or rented properties — non-declaration results in automatic vacancy tax assessment
- The "rented for 6 months" exemption typically requires a formal written lease and may not be met by short-term or informal rental arrangements
- Short-term rentals (Airbnb-type) generally do not qualify for the rental exemption under the Toronto and Vancouver programs, which target long-term occupancy
- Corporations holding residential property in Toronto or Vancouver face declaration obligations even if the corporate structure is entirely Canadian
For non-residents — including Canadians who have become non-residents — both the federal UHT and the applicable municipal program may apply, creating a combined tax burden on vacant or underused properties.
6. Compliance and Planning Strategies
Proactive compliance is the most effective strategy for managing vacant home tax obligations. Key steps for property owners include:
- Identify all applicable regimes: Determine whether the property is subject to the federal UHT, the Toronto VHT, the Vancouver EHT, or any other municipal program based on its location and the owner's status.
- Calendar all declaration deadlines: Each regime has its own deadline — missing them results in penalties on properties that may owe no underlying tax at all.
- Document occupancy or rental: Whether claiming the owner-occupancy exemption or the rental exemption, contemporaneous records are essential — lease agreements, utility bills confirming residency, or rental income receipts.
- Review holding structures: Properties held through corporations, partnerships, or trusts require careful analysis of which entity is the "owner" for each regime's purposes and whether that entity qualifies as excluded or affected.
- Assess rental arrangements: If a property is intended to be rented, ensure the rental arrangement meets the minimum occupancy period (typically 6 months) and involves a written lease to qualify for the rental exemption.
- Non-resident UHT analysis: Non-resident owners should assess every Canadian residential property they own — not just vacant ones — since the UHT return requirement applies to all affected owners even for exempt properties.
Our tax professionals at Swift Accounting assist property owners with UHT compliance, municipal vacant home tax declarations, and the planning of residential property holdings across multiple jurisdictions. Contact us at (403) 999-2295 or mailbox@swiftltd.ca.