The latest on the Underused Housing Tax
The Underused Housing Tax (UHT) is a new federal tax that is applicable for 2022. Affected owners must submit an Underused Housing Tax return (UHT‑2900) in respect of each property that was owned on December 31, 2022. The filing deadline for this tax return was originally April 30, 2023, but the Canada Revenue Agency (CRA) announced a transitional relief provision to waive interest and penalties for returns submitted no later than October 31, 2023.
Throughout the summer, we monitored new developments regarding this tax filing. We were hopeful that additional guidance or exemptions would be announced to reduce the administrative burden on Canadian filers. However, there have been no substantial changes since our previous communications with you. Refer to the newsletter here for further details on the UHT.
Although this tax was intended to target vacant or underused residential housing in Canada owned by non‑Canadians, the legislation has created a filing requirement for many Canadians. Even though there may not be any taxes to pay, a UHT return will still have to be filed to declare an applicable exemption. A few common examples of situations where you are required to file include residential property owned on December 31, 2022 by:
- Individuals: Non‑Canadian citizens or permanent residents.
- Corporations: Residential rental properties held in corporations, or if you transferred the title to your home into a corporation for probate planning purposes.
- Partnerships: Residential rental properties owned as a partner or partnership. Rental properties jointly owned with other individuals may be considered a partnership depending on the reporting on your tax return and other factors.
- Trusts: Residential property owned as a trustee of a trust. For example, if a parent owns 1% of their child’s home to help them obtain a mortgage or where an individual is on title for the beneficial ownership of another individual.
The above list is not exhaustive, please refer to the CRA guide for a complete list of affected and excluded owners. The legislation is not straightforward, and being a Canadian resident does not automatically exempt you from the UHT rules. We encourage you to review the ownership details of any residential property you may have an interest in to ensure you don’t have a filing obligation. We recommend you review your most recent property tax bill to confirm who is on the title for each property. However, please note the property tax bill may not have been updated for any ownership changes which occurred after the original purchase. Please inform us if you are aware of any changes to ownership. The minimum penalty for unfiled or late‑filed returns is $5,000 for individuals and $10,000 for non‑individuals.
Please contact us as soon as possible and we would be happy to assist you in assessing your filing obligation and with the preparation of these returns.
NOTE: Please understand any posts written in the past may not be reflective of the current applicable obligations, rights and benefits.