by Paul Rayburn, DAR March 3, 2023 with updates October 09, 2023.

What you need to know.

If you are at all unsure it is always advisable to consult a professional tax consultant to determine your individual tax liabilities. If you have identified that you may be subject to the Underused Housing Tax (UHT), you have two options to determine what amount you must pay. 1) Use the Taxable Value. This would be the value provided by your provincial or territorial property tax assessment authority. In the case of British Columbia, that is BC Assessment. You should have received an assessment in January of this year that was based on your property value as of July 1, 2022. If you don’t have that handy you can search for it here. https://www.bcassessment.ca/ Either by address or PID. On the off chance you don’t have either of those handy but know how to find your property on a map, you can search here https://parcelmapbc.ltsa.ca/pmsspub/ to get the PID and then enter that into the BC Assessment search by PID

Once you have identified the correct property and found your assessment value you need to decide if that is a reasonable market value. Option 2) is to use a Fair Market Value. That’s where an appraisal may be beneficial as the act allows you to obtain a Fair Market Value at any time during the applicable tax year and up until the filing due date which for the 2022 year is an exception granted until October 31, 2023. In particular, in the current market where the BC Assessment Taxable value is based on the value as of July 1st, 2022, and many market values since that date have varied significantly with the lowest values typically in the late fall of 2022 and winter but that does vary by market. Therefore, considering that the program allows a fair market value date to be chosen by the applicant at any date within that period there could be significant savings, which may be enough to cover the cost of an appraisal. See the link to the CREA Home Price Index Tool (HPI) below which may provide some insight on the value trends. It is important to note that as this is to be an arms-length appraisal report, the appraiser cannot accept an assignment contingent on reporting a pre-determined value and the fee for the appraisal cannot be based in any way on expectations for any specific result. The deadline to file is noted to be April 30th of the following year. For the current year that would have been any date in between January 1, 2022, and April 30, 2023, with the filing due by April 30, 2023 but an extension has been granted for this first year allowing a late filling until October 31, 2023 and before November 1, 2023.

*NOTE THIS WAS REVISED ON THE CRA WEBSITE FROM WHAT I CAN TELL ON SEPTEMBER 19, 2023. SEVERAL MONTHS AFTER IT HAD ORIGINALLY BEEN POSTED. IT APPEARS THEY CONCLUDED THAT WAS A CONFUSING DATE STRUCTURE. ON OCTOBER 31 AND BEFORE NOVEMBER 1 ARE EFFECTIVELY THE SAME DATE. THAT MAY HAVE CAUSED SOME CONFUSION AND MISINTERPRETATION BY THOSE THAT MAY HAVE READ THAT TO BE FILING DUE OCT 31 AND PAYMENT DUE BY THE END OF THE 1ST OR WORSE THE END OF THE MONTH. SO, IT NOW ONLY SAYS FILING DUE OCTOBER 31 AND PAYMENT DUE OCTOBER 31.

Keep in mind the appraiser will require time to complete the report so it is best to give as much time as possible therefore. I would advise doing that as soon as possible and for the 2022 tax year, I would recommend by not much later than the end of September 2023. Depending on your property type and available information we may still be able to still complete this in time for the 2023 filling date so please call us to discuss the timing and options available to you.

Here’s a link to the CREA Home Price Index Tool (HPI). Your local realtor or appraiser may also have access to a more neighborhood-specific HPI tool to possibly gain a little more insight. https://www.crea.ca/housing-market-stats/mls-home-price-index/hpi-tool/

(Hint you don’t need to hit the red “download data” button, just select the options and click apply )

These are only approximate and cannot be used to actually determine the value of your property. Always discuss with a professional when it comes to making any conclusions or assumptions as there can be significant variances in the values derived from BC Assessment and the HPI tools.

Here is an image of the Interior regions HPI From January 1, 2022, to the most recent date we have data for February 2023.

Image of the Interior regions HPI From January 1, 2022, to February 2023.

In summary, if you have concluded that you must file this document, the basic considerations relating to the decision to either use the BC Assessment value or determine a Fair Market Value are 1) Determine if you feel confident that the BC Assessment value is reasonable as of the July 1st date. 2) Determine that at some period between January 1, 2022, and April 30th, 2023, the actual Fair Market Value was lower by an amount worthy of the cost of an appraisal. The cost of the appraisal will vary by market and complexity of the analysis. The appraisal can be completed by an AIC Appraiser designated as either AAIC or CRA or a CNAREA appraiser designated DAR or DAC. It should be noted that an appraiser accepting an assignment for this purpose is not acting as a consultant and they must act as an independent arms-length party. This may be different from a BC Assessment appeal where an appraiser may act as a consultant on your behalf to negotiate a lower value. That may be a topic worthy of another post however, the principal difference between these two scenarios is that BC Assessment will review your appeal and they will decide if your evidence is sufficient to warrant the requested deduction which they may or may not accept. They have a process and support to protect their own interests. In the case of the UHT filing, unless the appraisal is found to be inadmissible which would indicate a serious noncompliance issue for the appraiser, the appraisal would be assumed to be a fair assessment of the property value and accepted at its face value unless for some reason CRA disputes that value.

As always, consult a professional accountant or advisor to determine your obligations and if you require an appraisal let us know if we can help. If we are not able to service your area we may be able to help you source a credible appraiser in your area.

Here are links to the UHT information on the CRA website.

https://www.canada.ca/en/services/taxes/excise-taxes-duties-and-levies/underused-housing-tax.html#:~:text=of%20the%20exemption.-,Calculate%20what%20you%20owe,to%20assist%20in%20the%20administration%20of%20the%20Underused%20Housing%20Tax%20Act.,-Filing%20the%20return

https://www.canada.ca/en/services/taxes/excise-taxes-duties-and-levies/underused-housing-tax.html

Leave a Reply

Your email address will not be published. Required fields are marked *