Introduction: Toronto Vacant Home Tax (VHT)
As of 2022, owners of residential properties in Toronto are required to declare the occupancy status of their properties every year. The Toronto Vacant Home Tax targets vacant residential properties, aiming to increase housing supplies by discouraging owners from leaving their residential properties unoccupied. Every year, a property owner must file a separate declaration for each residential property that he or she owns. For a residential property with multiple units (e.g., a duplex or a triplex), the owner of the property can include all units in the same property on the same declaration each year. A residential property is not considered vacant if: 1) it is occupied as the principal residence of the property owner or a permitted occupant; 2) it is occupied as a tenanted property, including business tenants; or 3) it is vacant with an eligible exemption.
For 2022 and 2023, a Vacant Home Tax of 1% of the Current Value Assessment is levied on residential properties that have been declared, deemed, or determined to be vacant for the year. Starting from 2024, the Vacant Home Tax increases to 3% of the Current Value Assessment. The Current Value Assessment, used to calculate property tax, is the property value officially recognized and recorded by the municipality. Normally, every four years, the municipality conducts a province-wide assessment update and issues a Property Assessment Notice to every property owner, which shows the Current Value Assessment of the property. A property owner may also receive a Property Assessment Notice at any given time if there were changes to property ownership, legal description, or school support, changes to the property's value resulting from property reviews or renovations, or changes in the classification or tax liability of the property.
There are other similar taxes imposed on vacant residential properties across Canada such as the federal Underused Housing Tax and the Ottawa Vacant Unit Tax. These taxes, both set at 1% of the property value, serve a similar purpose to the Toronto Vacant Home Tax, aiming to address housing shortages by increasing housing supplies.
Administration Of the Toronto VHT
There is a Vacant Home Tax portal for property owners to submit annual declarations. Property owners can also submit a Notice of Complaint, file an appeal of any complaint decision, or respond to an audit using the same portal. Alternatively, all submissions, including declarations, can be made via mail.
The deadline to file the 2023 declaration will be February 28, 2024, unless there is a change of ownership. For property purchases completed prior to December 31, 2023, the new owners must submit the 2023 declaration by February 28, 2024. For property purchases completed between January 1, 2024, and February 28, 2024, the sellers must complete the declaration before the closing date.
Once a declaration is filed, property owners who are subject to the VHT will receive a VHT notice at the end of March of each year. The Vacant Home Tax payments are due in three equal instalments amount of each year. For 2024, the Vacant Home Tax can be paid in three instalments on May 1, 2024, June 1, 2024, and July 1, 2024.
Potential Penalties for Non-compliance
If a property owner fails to submit a declaration by the deadline each year, the undeclared property will automatically be considered vacant and will become subject to the Vacant Home Tax. Additionally, starting from January 1, 2024, there will be an automatic charge of $21.24 for failing to meet the declaration deadline. Failure to submit the declaration by the due date may also lead to a fine of $250. In cases of providing false declarations or failing to provide requested information to the City of Toronto, property owners could face fines of up to $10,000 in addition to being liable for the Vacant Home Tax.
The City of Toronto is also authorized to impose interest at the rate of 1.25 per cent monthly (15 per cent per annum) on the outstanding Vacant Home Tax amount from the first day of default, and this interest will accrue until the taxes are paid in full. In the event of default on Vacant Home Tax payment, the unpaid amount will be added to the property tax roll and collected in the same manner as regular property taxes.
These consequences highlight the importance of timely submission of declarations for property owners. Failing to meet the deadlines not only results in penalties and charges but can also lead to the loss of exemptions for which property owners may have otherwise been eligible. For instance, exemptions like the snowbird exemption or those related to hospital stays may no longer be applicable, and property owners may be required to pay the Vacant Home Tax in full.
Appealing A Decision on The Toronto VHT
Unlike federal taxes that are processed by the Canada Revenue Agency, a property owner who disagrees with a Vacant Home Tax notice resolves the issue with the City of Toronto. Property owners in Toronto have a two-stage process for addressing issues related to the Vacant Home Tax. The first step is to file a Notice of Complaint, which can be done through the Vacant Home Tax portal or by mail. Notice of Complaints can be filed for various reasons, including missed declaration deadlines, errors on declarations, or disagreements with VHT assessments. The Notice of Complaints must be received within the following time frames: 1) for VHT Notice of Assessment, any complaint must be received by the City of Toronto on or before the last business day of the year that VHT payment is due; or 2) otherwise, within 90 days of the date on the notices. If a property is determined not to be subject to the VHT, the tax is canceled, along with any applicable interest and penalties. Any applicable credits will also be refunded to the property owner or transferred to property tax.
In cases where property owners disagree with the outcome of their Notice of Complaint, there is an option to file an appeal request within 90 days from the date on which the decision was issued by the City of Toronto. Appeals are generally limited to the same issues raised in the initial complaint, unless the initial complaint leads to a reassessment or varied assessment. The property owner will receive a written decision letter from the City of Toronto by regular mail, once a decision is made.
Pro Tax Tips – Understand Your Obligations And Remember Important Deadlines!
There can be multiple deadlines related to a residential property located in Toronto. Property taxes likely have different due dates from the Vacant Home Tax. The deadline for filing a declaration is generally by February in the following year. However, the deadline for the annual declaration is subject to updates and changes approved by the municipality. For example, the deadline to submit the 2022 declaration was on February 2, 2023, while the deadline to submit the 2023 declaration is set for February 28, 2024.
Furthermore, the municipality can audit a declaration and request a property owner to provide supporting documentation for the filed declaration. It is essential for all residential property owners to maintain comprehensive records related to the occupancy status of the properties, including but not limited to, utility bills, use of address on tax returns and bank statements, and rental leases. According to the City of Toronto, supporting documentation is not required unless requested by the City of Toronto. If you are being audited for Vacant Home Tax or disagree with a VHT notice issued by the City of Toronto, please contact our expert Toronto Tax Lawyers for legal advice.
FAQ
I'm a retiree who regularly spends more than six months every year outside of Canada. Am I Exempted From The Vacant Home Tax?
A "snowbird" is exempted from the VHT if the residential property is designated as his or her principal residence for at least six months during the declared year. The term "snowbird", for Canadian tax purposes, refers to people who travel regularly outside Canada to stay in areas with warmer climates during the winter months. This exemption also applies to property owners who are regularly away from their principal residence due to other reasons for extended period of time. However, it is important to remember that each person can only have one principal residence. Other exemptions may also apply. For example, if the principal resident of the vacant residential property is in a hospital, a long-term care facility, or a supportive care facility for at least six months during the declared year, then the property is exempted from the VHT for up to two consecutive tax years.
What is the Consequence of Failing to Submit an Annual Declaration for the Toronto Vacant Home Tax?
If a declaration is not submitted by the deadline, the undeclared property will be deemed vacant and subject to the Vacant Home Tax. There is also an automatic charge of $21.24, effective January 1, 2024, for failing to submit a declaration by the deadline. Failure to submit a declaration by the deadline may also result in a $250 fine. False declarations or failure to provide information when requested by the City of Toronto, may result in a fine of up to $10,000 in addition to the Vacant Home Tax. The City of Toronto may also impose interest on the outstanding Vacant Home Tax amount from the first day of default, for as long as taxes remain unpaid. Upon default of VHT payment, the unpaid amount will be added to the property tax roll and will be collected in the same manner as property taxes.
As a result, property owners who were otherwise eligible for exemptions or reductions may lose those benefits if they do not submit their declarations on time. For example, the snowbird exemption or exemptions related to hospital stays may no longer apply. If you have been arbitrarily assessed for Vacant Home Tax or if you disagree with a VHT notice issued by the City of Toronto, please contact our expert Toronto Tax Lawyers for legal advice.