(updated February 12, 2024) The Underused Housing Tax (UHT) went into law in June 2022. The UHT affects private corporations, trusts, partnerships, non-citizens, and non-residents who own residential properties in Canada. Here are some key considerations:
How is a ‘residential property’ defined for UHT purposes?
Under the UHT rules, a ‘residential property’ generally includes:
- detached houses or similar buildings with no more than three units (this includes cottages, cabins, and chalets unless they are considered commercial property)
- semi-detached houses, row-houses, condominium units, and similar separate or divided premises such as a coach house or laneway house
Other types of buildings (such as high-rise apartments, hotels, and quadruplexes) are generally not considered residential property for UHT purposes.
Are you Excluded or are you Affected?
Excluded owners have no obligations or liabilities under the UHT. Excluded owners include:
- individual Canadian citizens or permanent residents holding property in their own name
- individuals who own a residential property through a mutual fund trust, real estate investment trust, or specified investment flow-through trust (SIFT)
- publicly traded Canadian corporations
- registered charities
- cooperative housing corporations
- Indigenous governing bodies or corporations wholly owned by Indigenous governing bodies
- municipal organizations or other public institutions and government bodies
Canadian residential property owners are who not excluded (‘Affected owners’) include privately held Canadian corporations, partnerships, trusts and trustees (except those specifically excluded above), non-profit corporations, and individuals who are not Canadian citizens or permanent residents.
If you are an affected owner, you must file an annual Underused Housing Tax return (Form UHT‑2900) by April 30 for each residential property owned in Canada on December 31 of the previous year (beginning December 2022). And—unless your ownership qualifies for an exemption—you must remit UHT equal to 1% of the taxable value of your ownership percentage of the property (as of December 31 of the previous year) by April 30.
UPDATE FEBRUARY 12, 2024: The application of penalties and interest under the UHTA for the 2022 and 2023 calendar years will be waived for any late-filed underused housing tax (UHT) return and for any late-paid UHT payable, provided the return is filed or the UHT is paid by April 30, 2024.
Additionally, certain specified Canadian trusts, specified Canadian partnerships and specified Canadian corporations are proposed to be excluded from the UHT filing requirements from year 2023 onwards.
Please note, the UHT is a separate and distinct tax from the City of Toronto’s Vacant Home Tax.
UPDATE MARCH 27, 2023: The application of penalties and interest under the UHTA for the 2022 calendar year will be waived for any late-filed underused housing tax (UHT) return and for any late-paid UHT payable, provided the return is filed or the UHT is paid by October 31, 2023.
Note: Under the UHT Act, an ‘owner’ is generally the title holder of the residential property under the applicable land registration system. However, life tenants, life lease holders or a person that has continuous possession of the land on which the residential property sits under a long-term lease may also be considered an affected owner.
Do you qualify for an exemption?
Although you still need to file a UHT return as an affected owner, you may be exempt from paying UHT on your residential property for the calendar year if it meets one of the following exemptions:
Exemptions based on the type of owner:
- a specified Canadian corporation
- a partner of a specified Canadian partnership, or a trustee of a specified Canadian trust
- a new owner in the calendar year
- a deceased owner, or a co-owner or personal representative of a deceased owner
Exemptions based on the availability of the residential property:
- newly constructed
- not suitable to be lived in year-round, or seasonally inaccessible
- uninhabitable for a certain number of days because of
- a disaster or hazardous conditions
- renovations
Exemption based on the location and use of the residential property:
- a vacation property located in an eligible area of Canada and used by you or your spouse or common-law partner for at least 28 days in the calendar year
Exemptions based on the occupant of the residential property:
- it is the primary place of residence for you or your spouse or common-law partner, or for your child who is attending a designated learning institution
- at least 180 days in the calendar year are included in one or more qualifying occupancy periods for your ownership of the residential property
A qualifying occupancy period is at least one month in a calendar year during which one of the following qualifying occupants has continuous occupancy of the residential property:
- an individual with a written contract who deals at arm’s length with you and your spouse or common-law partner
- an individual with a written contract who does not deal at arm’s length with you or your spouse or common-law partner, and who pays at least fair rent for the property
- you, or your spouse or common-law partner, who has a Canadian work permit
- your spouse or common-law partner, parent, or child who is a Canadian citizen or permanent resident
NOTE: Even if your ownership qualifies for an exemption, you must still file an Underused Housing Tax return for the calendar year if you are an affected owner.
Filing the UHT return
If a UHT return is required, the following information must be provided, regardless of whether or not an exemption applies:
- owner’s legal name and type of owner
- owner’s social insurance number (SIN), individual tax number (ITN) or business number (BN-RU) (will need to apply for the BN-RU number)
- property address
- property identification used in the land registration system
- property tax or assessment roll number (if applicable)
- residential property type
- year the person became an owner of the property
- owner’s percentage interest in the property and, if it is less than 100%, the form of ownership and the names of all other owners with an ownership percentage of 10% or more
- assessed value of the property
- most recent sale price of the property on or before December 31
If an exemption applies, the exemption is reported on the return.
Penalties for failing to file a UHT return on time
There are significant penalties if you are an affected owner and fail to file a UHT return by its due date. Affected owners who are individuals are subject to a minimum penalty of $5,000. Affected owners that are corporations are subject to a minimum penalty of $10,000.
UPDATE MARCH 27, 2023: The application of penalties and interest under the UHTA for the 2022 calendar year will be waived for any late-filed underused housing tax (UHT) return and for any late-paid UHT payable, provided the return is filed or the UHT is paid by October 31, 2023.
Multiple owners
If you are an affected owner who shares ownership with one or more co-owners who are also affected owners, each of you must file separate UHT returns for the property— even if your respective ownership qualifies for an exemption.
Record Keeping
If you are an affected owner of a residential property in Canada on December 31, it is important that you keep records to support the determination of your obligations and liabilities. Even if your ownership is exempt from paying UHT tax, you must still keep records. If you claim an exemption but do not have adequate records to support that exemption, the CRA may disallow it.
S+C Partners is here to help you
Our dedicated tax team is here to support you. Please call us at 905-821-9215 or email us at info@scpllp.com if you have any questions or require any assistance regarding the Underused House Tax—we would be happy to walk you through it.
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