Retroactive to January 1, 2022, the new Federal Underused Housing Tax (“UHT”) is an annual 1% tax levied against “owners” of residential properties that are considered vacant or underused in Canada and applies to all residential properties owned as of December 31st of each calendar year.
To comply with this new policy, non-excluded owners must submit an Underused Housing and Tax Return Form—and accompanying payment, if applicable—by April 30th, 2023.
However, the CRA has recently introduced a ‘grace period’ for affected owners, saying:
“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. This transitional relief means that although the deadline for filing the UHT return and paying the UHT payable is still April 30, 2023, no penalties or interest will be applied for UHT returns and payments that the CRA receives before November 1, 2023.”
After this period, failure to do so will result in a minimum fine of $5,000 for individuals and $10,000 for non-individuals. This form will need to be submitted annually for as long as the policy is in effect.
Who are Owners? What is considered Residential Property?
Key questions arising from this new policy are specifics around the definition of “owner”, as well as what constitutes a “residential property”. As written, the owner of a residential property for UHT purposes is the registered owner of the property as shown on a title search in the land registration system. Unless excluded, the owner shown on title to the property must file a UHT Return regardless of who or what holds the beneficial interest.
A residential property is defined as a detached house or similar building containing not more than three dwelling units, part of a building that is a semi-detached house, a rowhouse unit, a residential condominium unit or other similar premises that is, or is intended to be, a separate parcel of land or other division of property party from any other unit in the building to which it is attached.
Is anyone excluded?
Excluded owners have no UHT filing obligations. An owner is excluded from filing if on December 31st, they are:
Corporations and Trusts Beware
This policy may have significant impact on corporate owners of residential properties—or those who own via a trust. Since these corporate entities typically complete tax filing in line with their fiscal year-end—not calendar year—they risk missing the April 30th deadline simply because they didn’t know a separate filing was required. It’s therefore important to speak with your accounting or legal partners to ensure you’re submitting on time and avoid a fine.