The 2021 Federal Budget announced an annual tax on residential real estate owned by non-residents that is considered underused. As a result, the Underused Housing Tax (UHT) was announced in June of 2022, which sees new reporting requirements for properties owned on or after December 31, 2022.
For owners who are required to pay the UHT, they will be required to pay a one percent tax on the property for the year of filing.
While many properties will not end up paying the UHT, there are reporting requirements that must be followed with penalties for non-compliance.
When is the report due?
The original filing deadline was April 31st, however, after industry pushback, relief was provided and no penalties or interest will be applied for UHT returns and payments that the CRA receives before November 1, 2023. All owners who do not fall under a reporting exemption (known as “excluded owner”) must complete a return and remit any taxes by October 31st to avoid penalties. Even if you are not required to pay the UHT, you must report your ownership on Form UHT-2900 or Online.
Do I have to report my property?
Unless you are considered an “excluded owner” you must report your property. You are considered an “excluded owner” if you fall under the following categories:
- An individual Canadian citizen or permanent resident of Canada
- A publicly traded Canadian corporation
- A person with title to the property in their capacity as trustees of various widely held trusts
- A registered charity
- A cooperative housing corporation
- A municipal organization or other public institutions and government bodies.
All other owners are required to file an annual return.
What if I don’t report?
Failure to file an annual UHT return will result in the following penalties:
- $10,000 for corporations, trusts, and other non-individuals
- $5,000 for individuals
Interest and penalties will also apply for any unpaid balances.
What properties are subject to the 1% UHT?
The UHT applies to residential properties in Canada that are not owned by an “excluded owner” and do not receive specific UHT exemptions.
What are the UHT Exemptions?
There are several UHT exemptions, and these only apply to properties that are not held by “excluded owners” as indicated above. Note that if you are exempt from paying the tax, you are still required to complete a return.
Your ownership of a residential property may be exempt for a calendar year if you are:
- A specified Canadian Corporation. Defined as having more than 90% Canadian Ownership
- A partner of a Canadian partnership.
- A trustee of a Canadian Trust
- A new owner in the calendar year
- A deceased owner.
Your ownership of a residential property may be exempt for a calendar year if:
- The residential property is newly constructed.
- It is not suitable to be lived in year-round.
- It is uninhabitable due to renovations or hazardous conditions.
There are additional exemptions based on location and use, as well as the occupancy of residential property. A more fulsome list can be found here.
Filing Your Return
As indicated above, your report must be completed by all owners who are not considered “excluded owners”. This report was due April 30th. As mentioned, no penalties or interest will be applied if reports are filed before November 1, 2023. Filing can be completed Online or by Mail.
If you have any questions regarding the UHT, please do not hesitate to reach out to your TPC Financial Group Advisor. Unfortunately, we are not able to complete your UHT filing on your behalf but we will be able to point you in the direction of resources that will assist with filing.