NEW UNDERUSED HOUSING TAX Return and Election
Form Due April 30th.
Are you required to file?
As part of the ongoing effort to discourage ownership of vacant or under-used residential property, the federal government introduced the Underused Housing Tax (“UHT”). The UHT is effective January 1, 2022 and applies a 1% annual levy on the value of vacant or underused property.
Generally, the UHT applies to non-resident, non-Canadian owners of vacant or underused housing in Canada. However, a filing requirement may exist for certain Canadian owners of residential real property.
Residential Real Property
Residential real property includes:
- Detached houses, duplexes and tri-plexes
- Residential condominium units
- Residential row house units or town houses
- Semi-detached houses
- Cottages, cabins and chalets
- Laneway houses and coach houses
Who is Required to File
The following entities that own Canadian residential property (on title) on December 31st, will be required to file even if no tax is payable:
- A Canadian Controlled Private Corporation
- Any person that owns a partnership unit
- Any Trustee of a Trust
- Any individual who is not a Canadian citizen or permanent resident
- A corporation that is incorporated outside Canada
- A Canadian corporation without share capital
Registered charities, public sector entities and non-profit organization may also be subject to UHT and UHT filing obligations. Although registered charities and many public sector entities are generally exempt from UHT, they may be effected where residential property is held indirectly through other entities.
A separate UHT return is required for each residential property owned.
Penalties That Apply – WATCH OUT
A failure to file a UHT return can result in significant penalties. Affected owners, who are individuals, are subject to a minimum penalty of $5,000. Other entities can be subject to a minimum penalty of $10,000. Penalties may be higher if the UHT applies to the property based on the amount of tax owing.
Due date for filing and payment of UHT
The filing and payment due date is April 30th of each year.
The due date of May 1, 2023 applies for the 2022 filing as April 30, 2023 is on a Sunday.
EXEMPTIONS FROM UHT
The following are some examples that allow for the exemption of UHT but a filing of a UHT return is still required in order to claim the exemption.
Qualifying occupancy – The property was occupied for at least 180 days in the year by:
- A third party under a renal agreement
- A related person paying fair market rent
- An individual who is the owners’ spouse living in Canada under a work permit
- An individual who is the owner’s spouse, parent or child who is attending school in Canada
Availability of the residential property – If the property is:
- Newly constructed
- Not suited for year round living
- Uninhabitable for a certain number of days due to renovations
Exemption for new owners is available for the first year of ownership.
Exemption for ownership held by corporations where foreign ownership interest in the corporation is less than 10%.
FILING OF UHT
The UHT return can be filed by mail or electronically via the Canada Revenue Agency (“CRA”) website. A digital access code must be obtained first. A valid CRA tax identifier number will be required.