Underused Housing Tax
December 6, 2023 at 3:00:00 p.m.
Effective January 1, 2022, the Canada Revenue Agency introduced the Underused Housing Tax (UHT). See what that means for you and what steps you may have to take.
1. Annual 1% Tax: The UHT is an annual federal tax of 1% on the ownership of vacant or underusedhousing in Canada.
2. Affected Owners: Certain Canadian owners may be required to file an annual return as follows:
a. A Canadian citizen or permanent resident will have to file a UHT return if they are an owner of the property in their capacity as a trustee of a trust (other than a personal representative in respect of a deceased individual) or as a partner of a partnership. For instance, if your name is on the title of a residential property, but you do not have beneficial ownership, you must file the UHT return. Most of these people will likely be exempt from the tax but will pay a minimum $1,000 penalty per person per property if they do not file.
b. A Canadian private corporation must file a UHT return if they own residential property in Canada on December 31st of the calendar year. Most Canadian private corporations will likely be exempt from the tax but will pay a minimum $2,000 penalty per property if they do not file.
c. Non-resident non-Canadians must file a UHT return if they own residential property in Canada on December 31st of the calendar year. Whether the tax is payable will depend on whether they are eligible for any exemptions.
3. Excluded Owners: The majority of Canadian owners of residential property are excluded owners and may not have obligations under the UHT.
4. Filing Deadline: The deadline for annual filings is April 30, with penalties for late filings. The cutoff for penalties related to 2022 filings is extended to April 30, 2024.
5. Penalties: Failure to file on time may result in a minimum penalty of $1,000 for affected owners who are individuals or $2,000 for affected owners who are not individuals such as a corporation or trust.
6. Property Holding Structures: Canadians may unknowingly hold property through partnerships or trusts, affecting their UHT obligations. For example, parents who were added to the title of their adult child’s home because they co-signed the mortgage could be considered to hold that property in trust. The same might apply to a person who holds title to their aging parents’ home, a common arrangement that can simplify the process of transferring a property when one’s parents die.
We strongly recommend reviewing your property holdings and assessing whether you fall under the UHT requirements. If you have questions or concerns, please don’t hesitate to reach out to us. Additionally, consulting with your lawyer or advisor can provide valuable insights.
Stay informed and let us know how we can assist you in navigating these changes effectively.