New Government Rules Target Home-Flipping and Underused Foreign-Owned Properties

The Canadian government has introduced a new rule in Budget 2022 that effectively increases taxes on home-flipping. Under this new rule, the government will assume that anyone who sells a home after possessing it for less than 12 months is flipping the property. Profits from the sale would be considered business income and not a capital gain.

However, the new rule comes with a number of exceptions, such as selling a home because of a death or divorce. Some experts believe that home-flippers will likely look for ways to get around paying the tax, as they will be able to come up with some reason as to why these rules don't apply to them.

In addition to this, the government is also introducing an Underused Housing Tax (UHT). The UHT is a national, annual one per cent tax on the value of vacant and underused residential property in Canada owned directly or indirectly by non-resident, non-Canadians. The UHT will apply to any non-resident, non-Canadian who owns an underused or vacant residential property in Canada as of December 31, 2022, and these individuals will have to file a UHT return for the property by April 30, 2023.

There are a number of exceptions to the UHT, such as seasonal properties and properties made inaccessible by a hazard. Some experts believe that the range of exemptions to the UHT is notable, and that the tax planners and crafty people will find ways to get around these rules.