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Underused Housing Tax (UHT) - Explained

February 22, 2023

The Underused Housing Tax (UHT) took effect in Canada on January 1, 2022. It is an annual 1% tax on the value of vacant or underused real estate owned by non-resident non-Canadians. Although this tax typically applies to non-resident non-Canadian residential property owners, it may also apply to Canadian Private Corporations, Trustees of a Family or Bare Trust, and Partners of a Partnership in some situations.  

The rules state that non-resident non-Canadian residential property owners are required to file a UHT return annually. The filing of the tax return also applies to Canadian corporations, partners of partnerships, and trustees of Family or Bare trusts, including those with no foreign ownership or foreign beneficiaries, even where no tax is payable. If a UHT return is not filed by April 30, significant penalties may apply – a minimum of $5,000 for individuals, and a minimum of $10,000 for other entities.  

Who is required to file an annual UHT return?

If you own residential property in Canada on December 31st, you are required to file a UHT return, unless you are specifically exempt under the Underused Housing Tax Act.  

Individuals or entities that ARE NOT REQUIRED to file a UHT return include:  

  • Canadian citizens 
  • Permanent residents 
  • Public corporations 
  • Registered charities 
  • Universities, public colleges, and school authorities 
  • Hospital authorities 
  • Cooperative housing corporations 
  • Municipalities, or corporations owned by such entities 
  • Indigenous governing bodies or corporations owned by such entities 
  • The Government of Canada, Provincial Government, or agent of either 
  • Various forms of publicly traded trusts 

Individuals or entities that ARE REQUIRED to file a UHT return include:  

  • Private Corporations   
  • Trustee of a Family or Bare Trust   
  • Partner of Partnership
  • Non-resident individuals, that are not citizens or permanent residents of Canada

How is the UHT calculated?

1% of the property assessed or appraised value on December 31st multiplied by the applicable ownership percentage is how to calculate the UHT payable.  

The property value is the greater of:  

  • The assessed value for the year for property tax purposes, and 
  • The most recent sale price during the year

Owners have the option to make an election to use the fair market value so long as a written appraisal is obtained to support the value. Owners have until April 30 following the calendar year to file an election.  

Tax and reporting requirements? 

Any legal owner (except owners which are excluded owners) of a residential property in Canada is required to file an annual UHT return and pay a 1% tax on that property for the year if none of the exemptions are applicable to the Property. The UHT is levied in addition to similar vacancy taxes levied by certain provinces and municipalities.  

The deadline to file a UHT return and remit any tax payable is April 30, following the calendar year.  

Given the complexity of the rules, there are many questions about how the UHT will be administered. The Canada Revenue Agency (CRA) may release further guidance before the 2022 returns and taxes are due, so stay tuned. 

Exemptions from the UHT? 

Although you may need to file a UHT Return under the UHT Act, you may not be liable to pay the UHT pursuant to a number of statutory exemptions.  

These exemptions may apply depending on the type of owner, the occupant of the property, the availability of the property, or the location and use of the property. 

How can we help?  

If you believe you are required to file a UHT return and would like our assistance for the preparation and submission, please connect with us by filling out the contact form below or reaching out to the partner or manager in charge of your engagement directly.   

For more information pertaining to the Underused Housing Tax (UHT), please refer to the official Government of Canada’s information page here. 

Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. Empire, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.

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