Municipal tax rate flexibility

Development potential relief

Municipal councils may, by bylaw, apply a reduced tax rate to the assessed land value of certain occupied commercial and industrial properties with development potential. This property tax relief mechanism is being implemented for the first time in 2023 and replaces the Interim Business Property Tax Relief legislation.

Municipalities may tax land value of certain industrial and commercial properties in Class 5 (Light Industry) and/or 6 (Business and Other) at a reduced rate. Municipalities are also able to set the rate and choose the percentage of the land value to be taxed at the lower rate via bylaw.

The intent is to provide business occupiers of properties with development potential with a reduction in property taxes where municipalities consider it to be warranted. The relief is intended to be for the purposes of relieving taxes related to development potential.  To qualify, a property must:

• Have land and improvements in Class 5 (light industry) and/or 6 (business and other)
• The improvement must be occupied as of October 31 of the previous tax year
• Have a combined Class 5/6 land value that is a minimum of 95 percent of the total Class 5/6 assessed value

A property is ineligible if:

• More than four years have passed since it first received the relief (or a prescribed period of more than four years)
• Any portion is in Class 2,3,4,7,8 or 9 (it can only be split with Class 1)
• It is a restricted-use property or has a prescribed value or tax rate
• Any portion is exempt from municipal taxation (unless otherwise specified by regulation)
• The land value is subject to assessment averaging or phasing

The tax rate reduction applies exclusively for general municipal tax purposes. Through the bylaw, municipalities will annually determine which properties are eligible, the reduced tax rate to be applied to the land values in Class 5 and/or 6, and the percentage of the land value to which the reduced tax rate applies. It can be applied for up to five consecutive years per property, and eligibility is determined annually.