Understanding Ottawa’s Vacant Unit Tax
On May 11, 2022, the City of Ottawa established a Vacant Unit Tax (By-law No. 2022-135), a measure aimed at addressing housing affordability and promoting the efficient use of residential properties. If you own residential property in Ottawa, this tax may affect you.
Each year, property owners are required to submit an annual property declaration for any residential property they own. A declaration needs to be submitted for every property owned.
What is the Vacant Unit Tax?
The Vacant Unit Tax (VUT) is an annual fee applied to residential properties that have remained unoccupied for more than 184 days (approximately six months) during a calendar year. This tax applies exclusively to properties classified as residential and excludes commercial and industrial properties.
Who Does This Tax Apply To?
The VUT does not apply to the following; however, a declaration remains mandatory:
- Principal residences.
- Properties occupied by tenants.
- Properties that qualify for an exemption.
Exemptions
Your property may be exempted from the VUT for the following reasons:
- Death or medical care.
- Significant renovations have been made.
- Please be advised that legal restrictions are in place (e.g., court orders).
For a complete list of exemptions, please refer to Vacant Unit Tax (By-law No. 2022-135).
Your Obligations as a Property Owner
All residential property owners in Ottawa are required to complete an annual declaration, irrespective of whether their property is vacant or occupied.
For real estate transactions, if a closing occurs between January 1 and April 30, the seller is responsible for completing the declaration for the previous calendar year. However, if a closing occurs between May 1 and December 31, the responsibility for completing the declaration falls upon the new buyer in the subsequent calendar year.
How Much is the Tax?
A VUT of 1% is applied annually to properties that remain vacant. This tax is calculated based on the property’s current assessed value as determined by the Municipal Property Assessment Corporation (MPAC). For instance, if a property has a taxable assessed value of $830,000 and is classified as vacant, the resulting vacant unit tax would be $8,300. It is important to note that for each consecutive year the property remains vacant the rate increases by 1% up to a maximum of 5%. The rate resets back to 1% after the property is declared as occupied.
How to Comply
- It is imperative to meticulously document occupancy periods, rental agreements, renovation permits, and any circumstances that might qualify for exemptions.
- It is your responsibility to complete the annual declaration honestly and on time, even if your property was occupied throughout the year.
- If you have outstanding tax obligations, ensure that your payment is received by the designated deadline to avoid penalties.
Conclusion
The VUT is a reflection of Ottawa’s approach to housing policy innovation and introduces new obligations for property owners. It is essential to be aware of these requirements, adhere to deadlines, and maintain accurate records, as non-compliance may result in financial penalties. Regulations are subject to annual updates, so it is recommended to remain informed. If you have any concerns, we recommend reaching out to the City of Ottawa or a legal professional to ensure your interests are protected.
Regulations can change, and individual circumstances vary. The information provided on this website is intended for general informational purposes only and should not be construed as legal or tax advice. We strongly encourage you to consult with a qualified legal professional before making decisions based on any content found here. Please note that accessing or using this website does not establish a solicitor-client relationship. If you require legal assistance, please contact our office to speak with one of our lawyers.