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Small Business Subclass Tax

With the Small Business Tax Subclass policy being passed by Council, many businesses, property owners, and residents, are asking questions about what this means for them.

OCOBIA has put together a summary consultation report for our BIA members (OCOBIA – SBTS Task force September 1 2021 (1)).

The full City report can be viewed here: updated: Small business tax subclass report to council

Summary of the Small Business Tax Subclass

The Small Business Tax Subclass is a new policy that will be introduced in 2022, whereby properties in the CT (Commercial Tax) class, that are less than 25,000 square feet, will receive a 15% property tax discount, over 2 years. 

In 2022, they will see a 7.5% tax deduction, and then the following year they will see another 7.5% deduction.

The balance, or residual, of this tax discount will be put onto the remaining properties within the Commercial Tax class (CT) at a rate of 1.46% increase over 2 years ( or 0.73% increase in 2022, then 2023). This will not be impacting the residential tax class.

This is a tax rate discount, not a subsidy given to a property owner and is not to be confused with subsidy programs like CERS. It will be reflected as a reduction in taxes within a property tax bill in comparison to the previous year (all else being equal)

How does this impact the small business?

Properties that are eligible for the Small Business Tax Subclass discount will be posted on the City of Ottawa website on January 31, 2022. Small business owners are encouraged to also visit the website at that time to see if their property applies.

The final commercial property tax bill for 2022 will be distributed in June 2022. 

To view the timeline, click here: https://ottawa.ca/en/living-ottawa/taxes/small-business-tax-subclass#timeline

And the financial change?

As the majority of commercial leases are Net lease plus expenses/tax, the tax bill will be forwarded to the tenant. The process between the landlord and tenant would not be any different. 

The tenant should be aware if their property is receiving the discount, and all else being equal, would see the discounted bill.

For a small number of properties, where there is a gross rent agreement, the tenant and landlord should meet to discuss what this would mean for their 2022 (and onward) lease.

 

Background information regarding Commercial Property Taxes

Tax Classes

The new Small Business Tax Subclass, will be within the Commercial Tax class (CT). There are other subclasses within CT. One of which is the Shopping Centre tax class.

The various tax classes and subclasses are listed on the City of Ottawa’s website here (https://ottawa.ca/en/city-hall/budget-finance-and-corporate-planning/tax-policy#tax-classes)

Tax Ratios

All property taxes are accounted/collected on an annual basis where properties grouped by class are assigned a tax ratio. Residential class tax rate is the base ratio of 1.

A tax ratio is the proportion by which a class tax rate compares to the residential class tax rate. Ottawa’s 2021 Commercial Tax (CT) rate is set to 1.84

The Shopping Centre Subclass is set to 1.48, and parking lots/commercial vacant land is set to 1.24.

These are the 3 ratios that are impacted by the implementation of the Small Business Tax Subclass. 

To view all of Ottawa’s tax ratios, please click here https://ottawa.ca/en/city-hall/budget-finance-and-corporate-planning/tax-policy#tax-ratios

About OCOBIA

Ottawa Coalition of Business Improvement Areas is an advocate and influencer on issues and policies affecting the economic development and well-being of Ottawa BIAs – and the businesses they represent.

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